When you are asked for the apache web root, you need to give the absolute path of the directory - eg. /var/www/html
If the RRD files are not being updated, you should check permissions on the RRD files, and check the output ofr MRTG when it runs to see if it is giving any helpful error messages.
You can verify the Routers2 configuration by using the URLhttp://yourserver/cgi-bin/routers2.cgi?page=verify
(you will need to give the appropriate hostname or IP for 'yourserver', and use .pl instead of .cgi if you are using Windows or mod_perl of course)