step 1: delete your old openxcom installation.
step 1a: if you have a folder named "data" in c:\Users\YourNameHere\My Documents\OpenXcom\, delete it.
step 2: unzip the latest nightly somewhere. (c:\games\openxcom\ for example)
step 3: copy your original xcom data into the ufo folder you just extracted. (c:\games\openxcom\ufo\)
step 4: apply the universal patch in the ufo folder. (as above)
step 5: run the game to verify everything is working. this will also set up your saved game folders, mod folder, and your config file.
step 6: mods can now be installed by extracting them to your user folder (c:\Users\YourNameHere\My Documents\OpenXcom\mods\)
step 7: to enable a mod after installation, run OpenXcom, go to the options menu, navigate to the "Mods" tab, scroll down until you see the name of the mod, and click to activate it.