Described in the following is how I set my windows system to use TeX Live 2010 and cwTeX 3.4.

1. I usually install texlive in a drive different from the system drive.  Let's say, f:\texlive\2010 is the place for texlive system.
3. Unzip cwtex.zip, put the content in f:\texlive.  So you will have a directory f:\texlive\cwtex.
4. Create the directory C:\Program files\cwtex and move the bin subdirectory in f:\texlive\cwtex to there.  Leave everything else untouched at the moment. So you will see C:\Program files\cwtex\bin.  The executable files of cwTeX 3.4 will not work if they are not there.
5. Add C:\Program files\cwtex\bin to the system path.
6. If you don't have it, create the file f:\texlive\2010\texmf.cnfand here is the contents:
OSFONTDIR = $SystemRoot/fonts// TEXMFHOME =$SELFAUTOPARENT/../texmf
TEXMFVAR = $SELFAUTOPARENT/../texmf-var TEXMFCONFIG =$SELFAUTOPARENT/../texmf-config
TEXMFLOCAL = $SELFAUTOPARENT/../texmf-local;$SELFAUTOPARENT/../cwtex

7. Also, move the subdirectory cwtex of f:\texlive\cwtex\dvips to f:\texlive\cwtex\fonts. So you will have f:\texlive\cwtex\fonts\cwtex
8. Create the directory f:\texlive\texmf-local\web2c
9. Create the file f:\texlive\texmf-local\web2c\updmap-local.cfg and here is the contents:
# cwtex
Map cwtex.map
Map cwtex1.map
Map cwtex2.map

10. Now open a command prompt window and issue the following commands one by one:
texhash
tlmgr -v generate updmap --localcfg f:\texlive\texmf-local\web2c\updmap-local.cfg
updmap-sys


That's it.