Dan

1. I downloaded your bundle to my desktop. (Keep in mind that my HD500 is not connected to my computer.)

Hmmm - I'm not sure why that is, but never mind you can still use Edit in off-line mode

2. I opened HD Edit.

Okay so far so good

3. I clicked on the Set Lists tab.

Okay, that's fine to check the contents and to rename the set lists if you wish - but I would open the Amps tab and from the drop down list on the left i would select Set List 5

4. All slots are empty right now.

Okay - that's because the HD500 which is where the presets are stored isn't connected

5. I tried to drag & drop your file into Set list 5. Can't do it.

Nope - you don't do it like that (well I don't LOL), although I think someone said they can drag and drop individual tones  You go to the File menu in Edit and select Open Set List and it will open the set list in the currently selected set list slot which should be number 5 as outlined in my answer to 3 above.

6. I was able to get it into Set List 1 but not 5. Why is that?

Because Set List 1 is the default selected set list when you open Edit and you haven't properly selected any other set list as in my answer to 3 above.

7. Its still not saved in that slot. I have tried everything but can't get it to save.

Edit itself doesn't store the presets and relies on being connected to the HD500 from where it retrieves the stored (in the HD500) presets for you to work on.  So when you open edit in Offline Mode (no HD500 connected) all the preset slots will be empty.  This is normal and expected behaviour

8. When I close HD Edit I lose your file.

No.  The file is still there but you must re-load it when Edit is in offline mode, but if the HD500 is connected and you've previously transferred the set list I uploaded for you to the HD500 it is stored in the HD500 and will be saved there.  The file on the computer is really a safety backup in case your HD500 gets wiped.   With my set list you don't need to re-save it as it already exists UNLESS of course you want to modify the tones it contains.

9. The only way I can get your file into Set List 5 is to highlight the whole SetList 1 and drag it into Setlist 5 but i still can't figure out how to save it.

See answer to 8 above

10. When i close HD 500, all is lost.

You mean when you close HD500 Edit? Yes? See answer to 7 - HD500 Edit doesn't store anything as a default set of presets - the HD500 does and the HD500 must be connected to Edit

11. I just don't understand what I'm doing wrong.

See answers 5 - 10

I hope that clarifies things a little more.