NO NO NO! Do not rename it it update.zip!
1.) Download the kernel
2.) Put the file anywhere on your sdcard.
3.) Power off your droid
4.) Boot into recovery by holding X while powering on the phone
5.) Perform a nandroid backup (always sound practice although this is not required. Its actually not necessary at all if you have a kernel that you know works well somewhere on your sdcard.)
6.) Press install zip from sdcard
7.) Press Choose zip from sd card
10.) Navigate to the file and click on it.
11.) When the install is complete press the power button to get back to the main menu
12.) Reboot
Thanks OMJ^^
Please read this as well:
http://androidforums.com/droid-all-things-root/136508-guide-all-things-root-related.html