[Milhouse]

You don't need to place the .py anywhere specific, nor do you need a .cfg file. When running the py file on the same machine that runs xbmc, the default settings should be good enough. If not, then create a .cfg and add the settings you need to change - don't go mad setting everything under the sun.

It's hard to say what error you are getting, without being psychic - maybe upload a screenshot or copy/paste what you see in your console so I've got a clue.

Make sure you haven't downloaded a web page instead of the source code - open the py file in an editor, if it's full of HTML you've downloaded the wrong file. Download the "raw" file.

Assuming you're running Windows, if you haven't added the location of the Python binary to your PATH variable you'll need to include "drive:\path\to\python\python.exe" when calling texturecache.py.