Mel,
When I set this up, it was a lot of little "nerd tweaks" that had to be done. Mayhem's really good at being nerdy
and I had him walking me through on AIM. I haven't seen him on there in a few days so I'm not sure what's up. Probably moving.
Anyway, to hopefully help you out:
1) You have to create a "false" .exe file, where the .hhf can be saved. Basically, just create a new folder and make an empirepoker.exe file in it. I remember this being a bit tricky and I don't exactly remember how I did it.
Now, in the party auto-import window, select "file location" (or whatever) and "enable" empire poker.
2) The FPHG file MUST be in the exact same folder as the empire.exe file. Sounds like you have the right idea. Get away from that B2B file.
3) iwitness does not import/read/save any hand histories. Iwitness basically let's you set parameters for tables you want to mine (i.e. >5 players, > $50 avg pot, or whatever you want) and then keeps 10 tables open at all times for you. If one gets too short, it closes it and opens another for you. This essentially allows you to mine all day, all night, if you want.
I'm not at home right now, so I'm going from memory. I hope I'm not forgetting anything.
Let me know how this works out for you.