Bob,
I think the confusion here is with the diference between the Host and Site in reference to skins, I'll try and explain it below.
When you're installing skins, you have 2 options. The first is to install it through the Host Extensions, which makes the skin available to all portals you create within your DNN installation. The second option is to install it through the Admin Extension, which will localise that skin to the specific portal you've installed it through (this skin will not be available to any of the other portals, unless you install it through the Admin Extension of that portal). The key here is to think of the admin dropdown being specific to the portal you're working in, and the Host dropdown as the umbrella settings for every portal created by the DNN install.
So, now when you're selecting a skin you've also got 2 options. The first is to pick a common skin that was uploaded through the Host Extensions, and these are available when you have the Host radio button selected. The second option is to pick from a selection of local skins, (ones that were installed through the Admin Extensions), which are available when you have the Site radio button selected.
As long as you are changing the skin settings for the Portal Skin and Portal Container within the Appearance section of the Site Settings in the Admin dropdown, it won't really make a difference if the skin is a Host or Site option.
I hope this helps clear things up.
Rick.