1. Just put the file on your sdcard by dragging and dropping it from your computer
2. Reboot in to recovery and wipe data and cache (before wiping go to nandroid and make a back up)
3. Still in recovery choose install zip from sdcard then select the froyo file.
4. You have froyo so grab a beer
I'll spell it out a bit more
1. Power down phone
2. hold down volume button
3. Hit power button (i keep both held until i get into stock Hboot)
4. Wait a few seconds while Hboot does it's initialization/checking thing
5. use the volume down button to select recovery
6. Press power button to boot into recovery
7. select install zip (not update zip) from SD card (using the volume keys or optical joystick for directional navigation. Press the optical joystick button for select)
8. Choose the Froyo file from the list
9. confirm
10. let the flash do it's thing.
DO NOT UNDER ANY CIRCUMSTANCES PULL THE BATTERY BEFORE THIS FINISHES!!!!