The permissions errors are because some tasks must be done by the "root" user. Use the root terminal to execute commands (can be found in the Xshells menu of the DSL menu), or "emelfm as Super-User" which can be found in "Apps>Tools>Emelfm File Manager". You can also execute commands as root from a normal user terminal by preceding them with the "sudo" command, eg. "sudo nano /etc/fstab".
Extensions can be loaded by double clicking on them in Emelfm, or using the command "mydsl-load <extension name>". On a HDD install, ".dsl" and ".tar.gz" extensions will be permaently installed on the system while ".uci" and ".unc" types will be gone at the next reboot. In a Frugal install, nothing stays. You can have them auto-load by placing them in a "mydsl" folder on a partition you specify in the menu.lst kernel line (see the "cheatcodes" page of the Wiki), or putting "mydsl-load" commands for each extension in the "/opt/bootlocal" file.
Did you get the floppy drive working, if you were only trying one disk it could have just gone bad.