Apologies if this is too elementary, but are you putting the rar file into Downloads? It doesn't go there.
For custom content (that is, other than Lots or Neighborhood Terrains) the contents of the rar file need to be extracted, and then the package files put into your Downloads folder.
Personal choice for both unzipping and unraring is 7-zip (free, safe and user-friendly):
http://www.7-zip.org/or you can use Winzip for zip file extraction and Winrar for rar file extraction, or another extraction program of your choice.
See here for a bit more:
http://www.insimenator.org/showthread.php?p=1418051#post1418051As for fixing the thumbnails, you can try this:
Go into My Documents--EA Games--The Sims2 folder.
Delete the groups. cache file (the game will auto-generate a new one for you when you play).
Then open the Thumbnails folder and delete all the contents inside it, but not the folder itself (the game will generate new thumbnails for you as you browse through the Buy and Build catalogs).
Your game may load slower than normally for you only the first time you launch it after the above deletions.
