Where have you installed FRED itself? It needs to be in the same folder as your WingCommanderSaga.exe.
The missions should be in Data\missions.
If it's still not working, run the fred2_wcsaga_d.exe. After you have done so, you will find a file called FRED2_Open.log in My Documents\Volition\Wing Commander Saga\data. That's a text file that can help us figure out what you're doing wrong.