All you do is run the program when you have DF running with a save loaded. I don't think the location of the stonesense folder itself matters much. But I keep the stonesense folder in the DF root for organizations sake, and it seems to work there.
I do appear to have discovered some odd behavior though. Different sprites for different castes no longer seems to function, or at least the method to identify them in the init has changed. No matter what individual in my fortress I mouseover, if always identifies them as caste 1 or 2, and seems to completely ignore all others. I copied my sprites and init directly over from the last version, which worked fine, so I don't think there are any problems there. And using the key to look through all the spritesheets, stonesense seems to locate them all just fine.
Here's a screencap if it helps understand what I'm talking about.
Debug mode on. The information lists the creature selected as a member of 'caste #1' A red scaled female Dracon, and displays the sprite for one. However the creature is actually a member of caste #5. A
green scaled female dracon. Which is a whole different caste not just a difference in coloration. Stonesense just seems to have stopped understanding what a number higher than 2 for the sex tag in the creature init means anymore.
Naturally if the feature was just decided to be more trouble than it's worth and was removed, I understand. Just seems unintentional since there was no mention of it being removed. And figured I would throw out a heads up. Since I seem to be the only one who actually uses that function currently, I was thinking if it is a mistake it could go unnoticed for quite some time if I don't mention it.