A Windows Vista gadget is just a zipfile with at a specified location the 'gadget.xml' file.
A mistake I've been making repeatedly is that I right click the folder with my sources and choose 'Send to|Compressed Folder'. Doing this adds the selected folder to the zip. I rename the zip to have the '.gadget' extension and then install the gadget.
Result: nothing happens. :-(
At the 'root' of the zip is a folder with the name of the folder I selected, my sources are one level too deep for Vista to find?!
There is however zero feedback from Vista. Very frustrating. A message saying something like 'Invalid gadget: gadget.xml not found.' would be a big help.