The template files must be in a special directory for security reasons. This rule makes it impossible for an attacker to fool FormMail into accessing secret files on your web server.
That's why we say "create a new directory to hold your templates".
I think the only problem you're having is that you need to set $TEMPLATEDIR to the full path to that directory.
Create a new directory on your server and set $TEMPLATEDIR to the full path from '/' to that directory. Put the template in there and it should work.