Ok to answer one question the best way to make themes is NOT through the theme builder. If you are going to be editing most of the OS images then I WOULD NOT use the theme builder. It takes FOREVER to add every single image individually and this can take a long time especially since every time you need to make a new zip because of ONE edited image then you have to add every file AGAIN unless you keep the theme builder open all the time
The best way to build your xml file is through eclipse. It is included in the Palm SDK and you can edit the xml files that way. Instead of building from scratch I used night0223's Original Blue Theme xml file. This file is very extensive and he has edited nearly every image you will want to. If you use this as a start you will be miles ahead in your process already with the xml file already created. I have used it even when some of the files included in the xml file are not actually contained within the zip file I have the images. The key to this is all about folder structure. You have to be organized. The xml file contains specific locations of where the images are so your image folder must be organized exactly how the xml file says it is.
If you have any confusion about this please let me know. This is kind of complex and way too much to type for one single post and I can help you with this.
Now to your other question about the destination of where these files are to be sent within the OS itself. There are specific areas of where images are located and where icons are located and where some apps are even located because they are not all in the same area.
If you take a look at nights0223's Original Blue Theme xml file it has the location of where each image is suppose to go. Again if you want to know more information let me know because this is also a very in depth subject in of itself. Check out this thread I posted thanks to PreThemer over at [url= Pre Themes, Wallpapers and Boot Screens @ PreThemer[/url].
This thread will give you an idea of what some images are, what they do, and where they are located.
Theming Guide