It sounds like you are dropping the MXM onto a material thumbnail in Cinema's Material Manager window -- that won't work, because Cinema decides what happens there, and what it decides is to try to open the dropped MXM as a new "model", the same as if you had use File > Open and chosen that MXM file.
When the plugin docs say "material preview image" they are referring to one of two things: a) the preview image inside of the plugin's material editor, or b) the preview image in the Attribute Manager UI of the material. When you drop MXMs (or folders possibly containing MXMs) there, the MXMs are imported into the model as new Maxwell materials. The reason it works this way is that the plugin "owns" those parts of the UI, and can decide what to do when you drag/drop things there.
As to what you are trying to do, the best way of altering an existing material would be:
- Open the plugin's material editor.
- Select the desired material.
- Click Options > Import MXM Data.
Alternatively, in step 3, you could click the browse button in the material's "Link to:" path, to import and link to an MXM file.