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no... you should not click to install it at all... copying to /system/app is enough. once it's there don't try to install it. the live wallpapers option should show up after that.
but now... you should probably try to uninstall it if you can (which should remove it from /data/app, but really not sure what will happen though if it's in both app folders... you may need to use root explorer to delete it from one or both places if uninstall doesn't work)
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