from the zip you should extract all files from the root of the zip, you should also include help, languages, and rules directories. IDK if anything contained in those directories matters but I include them because I don't have anything specific there. I don't extract plugins or profiles directories because I'm hooked up to the Adventurer and Trinity SVN to have the more current versions than what will be packaged with DB.
As for settings, extracting or keeping anything from the zip will not affect your settings, but if you have different versions of the plugins you'll overwrite your current version which is probably not desired.