Taken From: The WordPress MU Manual
While there is a Plugin Browser/Installer functionality which allows you to search and install plugins from within your main blog’s dashboard its best practice to manually install all regular plugins as outlined below:
1. Download the plugin
2. Unzip the file to extract all files into a folder on your hard drive
3. Check the zip file for a readme file. Make sure you read these instructions carefully – - some plugins may require additional steps to install other than those explained below!
4. Launch FileZilla and connect to your site
5. Enter your domain name, your username and password. NOTE: the same username and password that you use to log into your cPanel.
6. Click Quickconnect
7. Locate and open up the folder on your computer that contains the new plugin.
8. Open up your plugins folder for your site (located within wp-content folder of your public_html folder)
9. Select the plugin folder on your computer that you want to install and drag it into your plugin folder on your site.
Tip: Check the plugin folder to make sure when you unzip the file it hasn’t unzipped it as two folders!
10. Dragging the new plugin folder from your computer into plugin folder of your site uploads this plugin to your WPMU site however it doesn’t enable the plugin. Each plugin needs to be activated or deactivated on a per-blog level using the admin plugin page.
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July 9, 2009 
James Farmer on Google+
