Here is the steps which I use to add this feature into my blog.

First, create a new index template. You might want to name it "Google Toolbar Button" and then set the Output File to toolbar_button.xml. Then, copy the following text and paste it in as the body of the template.
<br /> <?xml version="1.0" encoding="utf-8"?><br /> <custombuttons xmlns="http://toolbar.google.com/custombuttons/"><br /> <button><br /> <title><$MTBlogName remove_html="1" encode_xml="1"$></title><br /> <description><$MTBlogDescription remove_html="1" encode_xml="1"$></description><br /> <site><$MTBlogURL$></site><br /> <search><$MTCGIPath$><$MTSearchScript$>?search={query}&IncludeBlogs=<$MTBlogID$></search><br /> <send><$MTCGIPath$><$MTSearchScript$>?search={selection}&IncludeBlogs=<$MTBlogID$></send><br /> <feed refresh-interval="3600"><$MTBlogURL$>atom.xml</feed><br /> <icon mode="base64" type="image/x-icon">AAABAAEAEBAAAAAAAABoBQAAFgAAACgAAAAQAAAAIAAAAAEACAAAAAAAAAAAAAAAAAAAAAAAAAAA<br /> AAAAAAD///8A//f3APf39wD39+8A9+/vAO/v5wDv5+cA5+feAN7e1gDe3s4A3tbOAN7WxgDW1sYA<br /> 1s7GAM7GvQDOxrUAxr2tAMa9pQDGtaUAvbWlAL21nAC1rZQAtaWMAK2ljACllHsApZRzAJyMawCU<br /> hGMAlHtaAIx7WgCMe1IAjHNSAIRzUgCEc0oAhGtKAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAA<br /> AAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAA<br /> AAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAA<br /> AAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAA<br /> AAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAA<br /> AAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAA<br /> AAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAA<br /> AAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAA<br /> AAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAA<br /> AAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAA<br /> AAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAA<br /> AAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAA<br /> AAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAA<br /> AAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAA<br /> AAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAA<br /> AAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAA<br /> AAAAHR0dHR0dHR0dHR0dHR0dHR0dHR0dHR0dHRoNGh0dHR0dHR0dIR0dHR0EECIdHSIdHR0dHR0d<br /> HSIVABciHR0YHR0dHR0dHR0iDgAFHSIdBx0dHR0dHR0dHQUAAAcNBQkdHR0dHR0dIhMAAAAAAAUa<br /> HR0dHSIdHRUAAAAFCRAcHR0dHR0UDQQAAAAQGiIiHR0dHRoIDQ4IAAAQIh0dIR0dHR0JDSIiGgUE<br /> HR0dHR0dHR0dBBoiHSIQDSIdHR0dHR0dHQUXIh0dDRAhHR0dHR0dHR0VABodFQAaIh0dHR0dHR0d<br /> HRUHAAkaHR0dHR0dHR0dHR0dHR0dHR0dHR0dHR0dHQAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAA<br /> AAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAA=</icon><br /> </button><br /> </custombuttons><br />
Save the template and rebuild it. Then,the last step is to make a simple link to the new file. That should look like:

<a href="http://toolbar.google.com/buttons/add?url=[your blog URL]toolbar_button.xml">Add to Google Toolbar</a>

Now you can see a new link alow you "Add this blog to Google Toolbar" in the right side of my index page's bottom.
Just try it! You are welcome to add a button of my blog to your google toolbar. Once installed, the button gives you easy access to my most recent entries and provides you with a simple way to search my site for a word or phrase you highlight on any web page.