Thought I'd expand on the actual unpacking process for the downloaded patch (points 4 and 5 above) as people seem to be having issues.
First up I use 7-zip for this process and have had no problems (unlike some using Winzip). I suggest those who need to read this post should use it too - it's free. Download it from:
http://www.7-zip.org/
Install either the 32 or 64 bit version depending on your operating system. If you're not sure - just use the 32-bit version.
Once installed on your system open 7-zip (See Pic 1 below)
In 7-Zip navigate to where you have downloaded the IL2COD_20111.rar file
On my system it is in E:\downloads\compressed. (See Pic 2)
Right click on the IL2COD_20111.rar file. This will open the 7-zip choice menu.
Go to
7-Zip >
Extract files and click. (Pic 3)
Now click on the box on top right with 3 dots in it (highlighted in red in Pic 4)
This is where the files will be extracted. So navigate to:
C:\Program Files (x86)\Steam\steamapps\common\il-2 sturmovik cliffs of dover
and click ok (Pic 5)
In the next screen click 'ok'. This will begin over-writing the new files to your COD installation.
When asked if you would like to over-write the existing files click on 'Yes to all'.
The process will complete and then you are good to go.