This is a common mistake among newbies to XOOPS and it has also happened to me when I first started using it. First of all, you have to clone the default template set from:

System Admin > Templates

and then choose the newly created template scheme from:

System Admin > Preferences > General Preferences > choose template set

and so on. After doing so, you will be able to edit almost every template on your system, thus changing the look of most blocks in your site i.e the mainmenu one, the usermenu one, the login block and so on...