I am using a Sandisk 1 GB SD card. It looks exactly like this:

To prepare the card, I am using Windows Vista Ultimate Edition. I insert the card into my laptop's built-in card reader. I open up the My Computer window, then right-click on the SD card in the F: drive, and select Format. I am going to format it to FAT16 first. it allows me to select the filesystem as FAT, and says [Default] next to it. It uses a 16 kilobyte Allocation Unit Size. I then select Start, WITHOUT selecting Quick Format. After a few minutes, the process finishes. Then, I open up a command prompt with the command "cmd". I tell the prompt to cd to C:\Users\[my username]\Desktop\SDLOAD . This is the directory where I unpacked the SDLOAD.zip file. I then input the command SDpatch.exe f:\ . Windows gives me a message asking me to allow or cancel the use of this program. I select "Allow". The command line brings up a new line. This is what it looks like after everything is done:

One note I should make is that I do not copy SDpatch.exe over to the SD card.
The next thing I do is copy the SDLOADER.bin file to the root of the SD card, as well as testdemo.dol. After this, I right-click on the F: drive [the SD card slot] and select "Safely Remove". I then remove the card when it tells me.
Then, I go over to my Gamecube, where the official Action Replay card is placed in slot B, and the WiiKey SD adapter is put in slot A. I then insert the SD into the SD card slot of the SD Adapter, and make sure that it's all the way in. I then start up the gamecube with a non-backup version of action replay in the disc drive. When AR starts, I double-check to make sure the codes are active. Then, I select "Start Game". It tells me to open the lid, and swap the game. I do not swap the game, as it is an official AR disk [though I have tried], so after I close the lid, it says 'Please Wait" and then the screen goes blank. I've let it run for hours, but nothing ever shows up on screen.
Here's a video of the whole process:
http://www.youtube.com/watch?v=Q8LoTk-Qhm0