What I would do would be a bit more complex (on the web side) but just as easy on the programmer's side.
Firstly, we'd have our web host, which would host zips (and possibly 7z's in the future, if support is added). The host has a page which displays the mod list, in a searchable method comparable to download.com (the current look of the MDC would get too big when more and more mods are added). This would be comparable to some other games mod centers. Once the user finds a mod they like, they download it (the web host will have individual pages created from XMLs, similar to how things are now, but more data would be needed for better security and features. Basically, a rough login system and ownership system would let modders upload their mods. Some users would always have ownership thanks to a "moderator status" to allow them to upload mods and update information on them. For the most part, each modder would be responsible for keeping their own mods up-to-date on the MDC). After the mod is downloaded, the mod installer will install the mod. Information can be contained in the page which specifies the engines of the mod, and the installer let's the player choose which engines to install it for (if compatible).
GAE mods would just place the file in the user's addon's folder (presumably, we'd have to check if the addons folder exists, and if not, let the user specify it's location (in case they set a different location for the folder), though, presumably we'd have the option to extract it into the the folders directly, if wished. I'm not sure if MG has a variety of the addons folder (I believe it does have a mydata folder or something), but if so, can be installed in there, while vanilla Glest mods would be installed directly by extracting the file into the Glest directory.
Programmer side, it's just catches the downloaded mod and installs it. The complexity is how to install the mod or patch. Web design side, it let's the player search, read descriptions, reviews, etc for finding the mod. Overally, it's just Yggdrasil's idea with a better interface.
On another note, how would a diff work? What if the user had v1 and wanted to update to v1.2 (skipping a version). I'd think there'd have to be 2 versions of the upgrade (which is what SMF, this forum, uses). Basically, there's a small upgrade which upgrades from the last version to the most recent, and there's the large upgrade, which contains all the files changed since the last major release (for example, Military's next version, 2.5, would have a small upgrade to upgrade from 2.4 to 2.5, whereas the large upgrade could upgrade from any 2.x to 2.5. Older than that and you'd need a full install). On the web design side, there's just a few download options. Upgrades would only be available to download if the modder made them available.
At any rate, the web design side WOULD work stand alone with or without the tool, and I will end up starting work on it as the next version of the
MDC.