I think I cracked it now... thanks.
It seems that the scaffold have to have the SPARROW_SRC variable and Demo have to have the source at the same relative place as it is in the zip...
This is what I did to make both work.
First I extracted the zip. I then copied the sparrow folder to my shared framework location. I then created the SPARROW_SRC variable. I then opened the scaffold project and fixed the iPhone sdk 3.0 missing error. This project is automatically looking at the shared framework location. This project now works
I then opened the demo project. But for this project I had to redirect the sparrow reference back to the relative location of the zip file. I then fixed the iPhone sdk 3.0 missing error and the project worked.
I dont know if Im doing something wrong here.
I also downloaded the project template for sparrow and that also works..
So I guess Im all good.
Thanks for taking the time to help me out.
Oh by the way. I may have missed it but does this framework support the accelerometer events?