My first assumption is that you installed the first downloaded file as preference-package.zip ? IF so, this needs to be unzipped first because inside that is the actual theme zip file that you install. As for the 500 server error, I’ve tried a new install on my local test site and was not able to replicate a 500 error….plus with the huge number of users of this theme, you’re the first to mention a 500 server error, so my guess it must be something else that is causing that. However, make sure there is no Preference folder in the theme’s folder of your WordPress and then unzip the Preference Package zip and then install the preference.zip that is inside that.
If you still run into problems, please contact me with your login details and I will be more than happy to install this for you.