Hello Roy,
I had this problem some time ago ... just make sure that the Lame version you have downloaded is compatible with the version of Audacity that you are running ....
The latest version of Audacity is 2.0.6 so you should be looking at downloading the Lame v3.99.3
To use Lame with Audacity, you can put it anywhere you want, but the first time you want to export an MP3 file, Audacity will ask you for the location of this file, so you will want to remember where you put it.
If this doesn't sort the problem get back to me Roy and we'll work through it
All the best,
Mike