They click the "install softmod" and everything is installed automatically on the harddisk. you might look at xboxhdm and kingroach ndure 3.1 install tutorials. They stand closer to what you are trying to achieve. I believe they even mention copiing over the necessairy files manually.
Start with a simple dashboard like unleashx. You can always alter it to Xbmc afterwards.
As far as I remember, you will need to copy 2 font files to your C partition (xbox.xtf and Ernie.xtf)
You will need to change the xboxdash.xbe to xb0xdash.xbe and copy a new xboxdash.xbe to your c partition.
You will need to create a bios folder on your c partitition. You need to place the nkpatcher program in that folder (a default.xbe)
And, you will need to copy the dash in the e:\dash folder.
My list of todo's is incomplete. It's purpose is to give you the idea about what is all happening behind the scene when you install the softmod.
You should also understand that if something is not done correctly, you will probably end up with a non working xbox. For instance, the 2 font files must be copied over in the correct order.
If you are not following a tutorial step by step, you should ask yourself at every step you are not performing what the consequences will be when you skip that step.
After all, you are trying to get something to work, that microsoft never wanted to work.
And trust me, if you don't do it correctly, it will not work. (Just the way they planned it to be.)