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If you directly edit 'theme.html' you must have set the option if prefs to 'yes' to allow template modifications (can't remember the exact wording). If you don't do this, changes to your theme will not be reflected on the site.
-- Edit --
Sorry, DefianceBoy has already said it! 'Check templates for modifications' must be 'yes'. You should set this back to 'no' when you have finished making changes.
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