You are correct, there is no readme.txt in the zip. We are going to be looking at this issue.
Meanwhile, i will outline what you need to do:
1. extract the zip
2. copy everything in the mycity_website folder to your site
3. next you can use the PSD or the PNG to update the images of the template
The best way to update the template is look at how the template is designed and see the different background images that are being used. I would recommend looking under the images folder and see how the images are used and how they are designed, this will help you in slicing the images from your template easier.
I have a pdf that could give you some more information as well:
let me know if you have any other questions.