I follow the same procedure for adding Scenery to the Scenery Library as was used in FSX before Steam edition, as noted in the install notes provided in the archive.
My preference is to keep the Toposim Continents files outside of the sim root folder, since I generally feed the same files into both FSX-SE and P3D4. I keep mine on an external drive in a folder TOPOSIM, so
Then in Scenery Library click Add Area and browse to [continent] folder, Name the Layer TOPOSIM [Continent] and click OK.
There is a Scenery Library bug that was introduced when Windows 7 was released, but there is an easy workaround noted here: