Functions.php and theme options

Hi,

I am trying to add theme options to a site i am building. I have followed the tutorial here https://themeshaper.com/2010/06/03/sample-theme-options/

My current functions.php file is just the one included in the download, when kept in a subdirectory, named theme-options along with the theme-options.php and stylesheet the theme options do not appear in the appearance section.

If i move the functions.php file into the main directory the whole thing breaks and i cannot see anything when i try and access the site.

Can anyone explain what i may be doing wrong with the functions.php file,

do i need to include other things in functions.php to load my theme along with the code to load theme options?

Will it only have an affect if it is within my main directory?

thanks for any help.