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You can edit or install templates by clicking on your system icon in system admin and then clicking on templates.
To install a theme you have to upload the theme folder into the theme folder of xoops. Then you go to system admin > preferences > general settings and look for "Default theme" and choose your theme. To choose your default template in general settings look for "Default template set".
It's always a good idea to test a new theme first before setting it as your default. Just highlight the new theme name with the default theme in the theme box of general settings. Then go to system admin > blocks and check off the theme block as viewable on the top page. Then go to system admin > groups and make sure the theme block is not viewable for anonymous and registered users, only for webmasters. You can then test new themes before making them your default theme, just to make sure there is no problems with the theme.