First, create a new folder on your desktop.
Second, extract the files from the archive into the folder you just created.
Third, open the folder you created and look for a folder called "saves".
Fourth, copy the folder "saves" into the main directory of wherever you installed K1, i.e., C:\Program Files\KOTOR\.
Finally, load up K1 and the saves should be there. You may need to hit the "Switch Characters" button on the load screen to see the new savegames.
Hope that helps.
- Star Admiral