You can put the patch wherever you like. It is only 202K in size so it will fit on a floppy. Since it is a zip file, you'll need Winzip or another archive program to extract it. Included in the zip is a readme which says:
* Extract the files to your 7th Guest directory
* Run v32tng.exe
To toggle between windowed/full screen modes
press both the ALT key and ENTER key at the same time and release (ALT-ENTER).