JSGME Questions

[Dogfish40]

Ahoy again.
I have several questions that have probably been answered numerous times before however, I can't seem to get them correct...so, here goes.
1. Does the JSGME exe file that I am using for SH4 have to go IN the SH4 program file? If so, Exactly where?
2. Does the MODS file I am using for the game have to go in the SH4 program file?

This is what I have so far. The JSGME exe file defaulted to my D/ drive downloads file. The JSGME shortcut found and enabled the MODS, however, at the time, the MODS file was in the D drive downloads file and did not work.
So I guess, in a nutshell, I am asking if the JSGME exe file ANS the MODS file BOTH have to be in the SH4 program file!? Is this correct?
Thanks for any help. Here is some more info;
Windows Vista, plenty of power, the game runs quite well.
MODS I am trying to enable; Captain midnights radio, EAX sound.
Just those two so far but I need to get this rolling so I can get some of the Bigger mods when I need them