There are two ways of installing LilyPondTool. One is from jEdit's plugin repository (via jEdit's Plugin Manager), and one is manual installation. For the first installation you should always use jEdit's Plugin Manager. If you want to install a development version, or just upgrade before the plugin repository is updated, use the manual installation.
Manual installation downloads are always at sourceforge project page.
The requirements are the same for both of them.
To have all the features of LilyPondTool working, you must do some configuration. This is necessary, because every user have different set ups of their system.
Because LilyPondTool is mostly targeted at non-technical Windows users, common defaults are set for them.
LilyPondTool upon first installation will set the executable paths and other system dependent properties to their defaults on Windows systems. If you use an other OS, you must set these yourself.
LilyPond consists of many executable files, on Windows including lilypond.exe and python.exe. You should set the LilyPond binary directory here, the default tends to be:
If you don't use absolute paths in the Commands part of LilyPondTool's plugin options (i.e. the path doesn't start with / or \ or C:\ etc), the commands will be executed relative to the LilyPond executable path.
Note that for convert-ly the default command is python convert-ly.py, that is using the python at the same place as the LilyPond binaries are (it is usually the case, so it should just work).
External PDF viewer
You should set Adobe Reader's executable, AcroRd32.exe, the full default path in Adobe Reader 7.0 is C:\Program Files\Adobe\Acrobat 7.0\Reader\AcroRd32.exe