Thanks Paul...I'm sure that you will be able to get this working properly on your site in no time.
You are correct about the documentation advising you to place the PowerCMS files in a subdirectory. Thanks for bringing that to our attention. Still, it is probably the safest way for users to avoid overwriting files or folders, and seems to be what most of our customers are doing.
However, since the first two lines of the Developer Notes are static and assume that the files displaying your content are in the root, the paths may need to be adjusted to work properly. We have updated the Adding Content to PowerCMS How To to alert users to this.