I quote this from my search in Google:The most common reason for this problem is that the File you have uploaded is too big. The File Size Upload Limit on your Server is set too low to allow larger files to be uploaded. By default PHP allows files up to 2 MB, but this limit needs to be set to 4 MB.
If you have access to the php.ini, then change the directive upload_max_filesize to "4M" and reload the server configuration.
If you are running PHP in CGI mode on Apache, you can place an .htaccess file in your Joomla! root directory and place the following code inside:
php_value upload_max_filesize 4M
You may also try to manually install the template by uploading the folder into <joomla root>/templates/ folder