Just one point, change dz extension to gz extension.
Inside the tarbal file you will find a folder: stardict-babylon-Babylon_English_Swedish-2.4.2
Inside the folder,
Babylon_English_Swedish.dict.dz (change it to Babylon_English_Swedish.dict.gz)
Babylon_English_Swedish.idx
and so on.
I used linux tools inside the iPod Touch to decompres the files.
Uploaded the tarbal file with a SSH aplications directly to the iPod.
I used bzip2, gunzip and tar from the iPod.
I installed those linux apliacions as I'm using Cydia also as an installer in my iPod Touch.
Hope it will word for you also. Now I only need the dictionary from Svenska to English, as the dictionary I found it's just from English to Svenska.
Good luck