Download, extract the files into a folder of your choice, doesn't matter where.
To create a new import file (which is actually more of a NG+ due to how it's handled), go File->New. Setup your character's class, name and all that stuff under the 'Basic' tab.
Then, under the Plot->Player tab, check "Played Mass Effect 1", ignore the Plot->Henchman tab for now, that's not going to change anything. The Plot->Mass Effect 1 tab has most of what you want for this stuff. Read the notes for the Values tab.
Not done yet! If you start like that, you'll have the default Shep head (depending on your gender) so you'll likely want to import a new head. Best way to do this is to make a new game yourself, make your own head (either using face codes from here or making your own), load up a second copy of the editor, load that save file with the new head, export the head mesh, then re-import it into your desired custom-made Shepard.
Finally, head to the Raw tab, scroll down to the Plot section of the table and there will be a End Game State line, click the drop down menu where it says 'NotFinished' and change it to LivedToFightAgain. Click save, make sure you save your new Shepard in a folder of their own in your ME directory (mine is Anna_11_Vanguard_110210. It goes Name_XY_Class_DD/MM/YY. The 'XY' refers to your Origin. X is Origin. Y is Notoriety. So in Anna's case, she's 11 which is Spacer Survivor. 32 would be Earthborn War Hero. You can find the numbers under the Plot->Mass Effect 1->Notes tab.)