Your plight highlights a few things that need to be added to the document.
There needs to be an introduction that explains what a local help server is and why you might want to set one up. Amy, you seem to be confusing this with the local help files (the ones actually distributed with Joomla!). The "local help server" is a separate instance of Joomla! running on your LAN (could be on the same machine, but doesn't have to be). This is useful, for example, if you only have an expensive dial-up connection to the internet, or you are running on a closed intranet with no access to the public internet. In effect it is a partial clone of help.joomla.org.
The other problem is that we are between versions and so the instructions cannot work right now anyway.
The 1.0.x help screens and the 1.5.x help screens are entirely separate. The document we wanted to create was about how to set up a help server to service instances of 1.5. But right now the only help screens available are for 1.0.x running on a 1.0.x instance. If you were to point a 1.5 instance at such a help server you would get "Key not found" errors for all the help buttons.
Once the 1.5 help screens have been written we will make a 1.5 help screen dump file available, but initially this will still need to run on a 1.0.x instance. The step after that will be to migrate the data so that you can set up a local help server running 1.5.x.
There needs to be some instructions on how to add your local help server address to the helpsite XML file and having done so, how to get Joomla! to use the new entry.
I also think it would be nice to give some information on how the help screen "key references" work. In other words, how clicking on a help toolbar button in Joomla! 1.5 with a key reference of "screen.config", say, is used to retrieve the article on the help server with key reference "screen.config.15" (note that the version number is appended to the key reference, except for 1.0.x). So when we start working on 1.6 the key reference will automatically become "screen.config.16".
Hope this helps.
Joomla Leadership Team - Production Working Group
Joomla Web Services http://www.kickstarter.com/projects/964120480/joomla-web-services
Lion Coppice http://www.lioncoppice.org