It's a bit tricker to install than a regular full conversion mod, because yes, the player does need to replace the shaders. We are working on making this process easier for users. Viper has made a
custom shader tool that can be used, which I think is the only thing so far that we have available for this because we only recently discovered what to do and how to do it. Quite a few people here are experimenting with shaders right now.
Perhaps Frictional will add some extra support for shaders by the release of the 1.3 patch, but I don't know. It would be nice, but I can only hope.