Some tutorials proclaim to explain this but don’t. In order to install G**gle Wave extensions you have to go to your first wave named “Welcome to Google Wave” and click on the “Extensions Gallery” link. There you’ll find an extension named “Extension Installer”, install it, then when you’re editing waves it’s on the toolbar (yeah, where you change fonts is where you install wave extensions). This allows you to install any extension by url and not just those that are in the gallery.
What a self referential headache that caused.
I think this extension should be pre-installed by default just like the map gadget and yes/no/maybe. And it might be a good idea to just integrate the extension into the settings wave. I would tell google what I think but the forums on the subject don’t seem like the right place to post a suggestion, they’re more akin to tech support: