To successfully compile FS one does need an updated compiler file for Inform. Try poking Nuku for it, as the improved compiler is not available yet in a public update by the Inform team.
As for the files, you basically grab the zip from the hub and unpack it into the Extensions folder. That should put everything where it needs to be. Oh, and then you grab the story.ni and put it in "Inform\Projects\Flexible Survival.inform\Source" and move the Figures folder to "Inform\Projects\Flexible Survival.materials\Figures"