1. The mod is compressed into a file called a 7ZIP. The abbreviation is .7z. You'll need WinRAR or 7ZIP (Google is your friend) to unpack it.
2. 7 Deadly Sins v2.1 is extremely old, and IIRC is for v1.05 of original Sins of a Solar Empire. So it isn't going to work with Diplomacy or Entrenchment, at all.
Unfortunately you've found a great mod, that's still in development and has a few great mods, but doesn't have a public release for the current version of the game.
On top of that, it's unlikely you'll get a public release of 7DS anytime soon, as there hasn't been anything released on it in forever, so it's quite possible that real-life issues have placed the mod on hiatus.