well, if you flash via http then you don't need to change names. If you flash via cd/dvd, you do need to change X3 3029.bin to bios.bin as you stated but the dummy.bin does not have to be renamed. In fact it can be any name you want because it's there to facilitate the reading of the 1mb bios file. You don't need to put skins folder in your cd neither. All you need are 2 files: bios.bin and dummy.bin.
I would suggest either to download another 3029 file just in case the first was corrupt or even before you burn another cd, try flashing to banks 5678 (off on off off off). If it also frag, I would either download another bios or try different flash method. If they continue to frag despite you used the right bios, try 2914 and see if it makes any difference. For some reason, people with 1.0 xbox have more luck with 2914 than 3029.