Yup, just place the update.xbe from Slayers in the files folder. Do not compress or uncompress any files. Not the ones already there, not the one you add (update.xbe).
All commands of this package will work out of the box, but the UDE installer needs the correct version of the update.xbe. So for the UDE command, the update.xbe is not optional! If it is not found the installation is aborted, as you have seen. You cannot get the hack running without the correct update.xbe (md5sum is checked to verify it's the right version). I could not add the update.xbe without breaking the rules of 'the usual places'.
So leave everything as it is in the package - only add update.xbe to the E:\UDATA\xxxxxxxxxxx\xxxxxxxxxxx\files folder.