The installation scripts will test your systems behaviour concerning | =| and || (see also documentation in fdprefix.tex). If those two commands use different search pathes it will ask you to specify an installation directory for all |.fd| files. In this case you now have to move the generated |.fd| files to this directory before making a format because IniTEX will only search this directory for files with this extension. Otherwise you can wait with this step.
Now make a new format by processing nfss2ltx with the IniTEX program. (How to do this exactly depends on your installation so we can't give you any advice here how to run IniTEX.) During this step the NFSS2 code will be loaded into your format in place of the old font selection scheme of LATEX. IniTEX will then read latex.tex and finally will stop with an asterisk prompt. At this point you should reply with the command || which will then produce the format file for you.
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