The backups aren't really something you need to worry about.
The hack wizard goes to step 6, because it's waiting for you to check out if the patch was applied. There should be a reset button on one of these screens where it's ready to verify the hack has been applied. Hit this, and the wizard will reset to wanting to apply the hack.
To reset youir firmware, try using the 'Update Firmware' process of the tools (Click on Create New DMS, select your DMS, Select the firmware, check the option 'Install non-hacked firmware' and then click on 'Update Firmware').
This'll save you having to mess around with the zip files.
Once you've gotten that far, re-run the hack wizard to apply the patch files and then rename flacplay and flacplay.sig by adding .old to each filename. Then rename patcher, flacplay and patcher.sig flacplay.sig. Add a FLAC file to a new playlist, make it the first playlist on the DMS (by changing the order) and then stick the DMS in your box. Switch to the PhatBox, it'll start 'playing' the first playlist/track and then start applying the hack. It'll reboot a few times, each time it reboots switch back to the phatbox. Eventually you'll get your hack message.
Once done, rename flacplay, patcher and flacplay.sig, patcher.sig and also rename flacplay.old, flacplay and flacplay.sig.old to flacplay.sig. Re-run the wizard to verify the patch worked and then your done.