Yesterday I installed a free theme through magento connect manager, and I could see that a new folder had been created in app/design/frontend. I could also activate it for different views.
Today I chose a different theme, "freetrex", installed it with Magento connect manager, and it shows up in the list of "Existing Extensions". But there is no new folder in app/design/frontend.
Also, when I check System - Design, and click to add a new design (just to see if the new one is available), it is not available in the list.
The only thing that has been created in backend seems to be an XML-file in var/packages: "freetrex-1.0.1.xml".
I tried to activate cache manager for configuration and layouts (which was deactivated). I thought maybe that may have preveneted the theme from being unpacked or something. But it doesn't seem to have solved it. I would be happy for some suggestions!
I got some info that there was a problem with the theme when installing through magento connect, and that it had to be installed "manually" in some way.
So the problem was with the theme!
You should really do a manual installation. Just copy the files (skin,js,app......) via FileZilla to Magento root folder. After you've done that everything can easily be managed via System - Design.