I'm sorry it took me so long to respond! I've been really busy recently and I've been traveling for the last week, so I haven't even been checking the forums. I'm actually still on the road, but I finally had the time to check in.
Based on what you said above, it seems like you've installed it correctly. You don't need to do anything with the files in the src directory, they're only there for people who want to compile it themselves or otherwise play with the source code.
The first thing I'm thinking of is, do you have wireless or wired networking turned on? For example, if you have the "unbrickable" mod installed, your wired ethernet will automatically start when the iLiad boots up. Wired ethernet will more than halve your battery life -- that is, the iLiad uses about 2.5 times more current with wired ethernet on. You might also have something else installed that turns on ethernet or wireless and then fails to turn it off?
Another possibility is: are you using an SD/MMC/CF card? These will also increase power drain.
Let me know whether you've ruled out the above possibilities. If you have, I can send you a diagnostic program that will record the actual current drain and voltage while the iLiad is on. With a logfile from that we might get a hint about what's going on.
If we rule out all other possibilities, then it's possible that your batteries are defective. But I think this is highly unlikely; there must be another explanation.
(By the way, the modified powerMgr works by monitoring the battery voltage, so it should work correctly for any lithium-ion or lithium-polymer battery of any capacity.)
Hope this helps!