When you boot into recovery, do you see this?
Second option from the top is how you install a rom. DO NOT rename your file update.zip.
I do not recommend downloading your roms through Rom Manager. Rom Manager is a finicky app and causes problems for a lot of people. Only use Rom Manager to flash clockwork recovery and to reboot into recovery. Download your rom manually either a) through your phone's browser - downloads will be saved to sdcard/Download or b) through your computer, then transfer them to your sd card via usb cable.
Once you have the rom on your phone, select wipe data/factory reset (third option from the top), confirm yes. Wait for it to finish - it may take a couple minutes.
Next, select advanced (seconds option from the bottom), then Wipe Dalvik Cache, confirm yes.
Now to install the rom, proceed with the "install zip from sdcard." Then "choose zip from sdcard." Then navigate to where you put the rom file, select it, then confirm yes. Wait - it may take a while. Be patient here. Once done, it will say install from sd card complete, or something to that extent. Select first option, "reboot system now." Be patient, first boot could take a loooooong time. No battery pull, just wait for it.
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