I know the process of custom node creation and I can deploy it into jar file. Placing that file in dropins works fine.
But what I want is, I really want to create knime extension. When I click on Help-->Install New Software-->Location of my plugin file. It should load the set of nodes. I need to know how to package a knime extension.
There is nothing special about a KNIME update site. It's a normal Eclipse update site as any other. Therefore the instructions linked by swebb are fully applicable.