Ok here's the issue, I created my first gadget. I tested it locally and after clicking "install' nothing happened, it didn't show up on my sidebar, but I got no errors. I submitted it anyway thinking it may need to be bundled with something from microsoft. Well just got an email saying being rejected "Your gadget doesn't show up in the Sidebar after it's been installed"
I have checked and rechecked the code, I'm thinking it may be a compression issue?
1. Make sure you didn't zip your main gadget folder, the zip should contain the contents of the gadget folder only.
2. Make sure your manifest xml file is encoded in UTF-8. Load it into Notepad and select UTF-8 as the Encoding to save it as, then resave it.
If it doesn't install for you, it won't install for anyone else. My guess is point 1.