Okay, I've finally reached a point where I'm ready to try this, and I'm having a problem with my own confusion. I know I asked this once before in this thread, but it's been a very long time and it's somewhere down in the middle.
My confusion is with the wording "
Create an empty working directory somewhere on your hard disk (where you have write permission.)"
I'm not sure what is meant by "directory". Does this just mean make a new folder? That I can do. But what does it mean? 
Oh, I'm also confused about the "Unpatched" part. I've already prepared a setup with GWX installed. Do I need to put in this fix before an supermods? If so it's not problem at this point to start over. I just need to understand it all.