The above is a frequent error and question that gets asked by many in the Kunena community. I hope the following short tutorial will help clear things up for those who are trying to install a new custom Kunena template.
In the backend of your Joomla site (joomla administrator) locate the Kunena template manager.
Components > Kunena Forum > Template Manager.
In the Kunena Template Manager locate the add button in the top right hand corner and select it.
Browse for the custom Kunena template you would like to upload.
Select the compressed file and click open.
Click on the upload and install button.
After installing you should now see your custom template in the Template Manager selection.
Last but not least don't forget to select your new template as the default theme.