At the Sorcerer's Palace where I downloaded it from it says unpack the files to your Overide directory.... what does that mean???

It means what it says. Extract or unzip (I assume the files are zipped) the files to the override sub-directory found under the main BG2 folder. It will place 2 small files called ar****.bcs (**** are some numbers) into the folder.
That's it.

Ahem... and to avoid a seemingly common error...

Once you've done that: Check to make sure you haven't got a folder named "override" inside the "override folder". That won't work. ;)

hmmmm wonder who oh who would be stupid enough to do that *giggle*

Kitiara! Hi! Where've you been??

Notice I didn't mention any names, hon... :D

what do I do with this misc. Overide folder?? I can't put it in BG2 without replacing the other one

The best (simplest) thing to do would be to unzip the file into a temporary folder. Then go to that folder, cut the 2 files and paste them in BG2's own override folder.

Eg:

1. Unzip to c:\temp (say)
2. Cut the 2 files (let's say they are called ar1234.bcs and ar9876.bcs) that are written to c:\temp.
3. Go to c:\bg2\override (which was how I installed my copy - yours may differ if you used the default path on installation) and paste the 2 files in there.

That's it.