How do you know that template preview is working when you can't select your template?

I may have confused you with my response, so I will reiterate:

The template options in the drop down are grabbed from image/templates directory - the OpenCart code is looking for .png files in that directory to generate the combo box template list in the admin panel. So if you have not added a screen shot yet you will not see your template in the combo box. If you do not have a screenshot to upload, simply try ftp'ing to the image/templates directory and duplicate the default.png image and rename it to yourtemplatename.png. You should see your template name in the combo box.
Kevin