Yes, Tutu is technically installed on top of BG2. You first install BG1 (full install), then BG2, patch them both, and then install Tutu in the BG2 directory. (There are some detailed instructions in the readme about all the steps you need to take). After it is installed, you must run the BGMain.exe file in the BG2 directory.
For more information, I'd suggest taking a look at the Tutu homepage:
http://www.pocketplane.net/tutu
The Tutu Fixpack is also available from the Pocket Plane Group, and The Gibberlings Three have released a Tutu Tweak Pack that is well worth the download, as well:
http://www.gibberlings3.net/tutu/index.html