The in-game importer has a screen that shows you the vmt settings (it's the material editor).

Can you show me a screenshot of the vmt settings you used? Just print screen > go to imgur.com and paste the image.

Np, good luck.

Make sure the version of SMD tools you are using matches the version of blender.

You might also want to check to see if your model is normalized. You can ensure this by first positioning/scaling your model properly, and then press ctrl+a and select "location", "scale", and "rotation". You can check to see that this worked by pressing "n" and checking to see if all the location/rotation values are 0 and all the scale values are 1 (under the Transform subheading). Then re-export your .smd file.

First of all: Don't waste your time making weapons. They have a 0% chance of getting in.

Secondly: It's probably that some of your normals are flipped. Recalculate your normals (ctrl+N) in edit mode. If that doesn't work, the problem might be that you have overlapping UVs.

OK, I'd just stick with 2.67 until Tom updates it.

It might have been that the script author hasn't updated it yet. How recently did 2.68 come out? I'm still using 2.63 myself, and it's been working fine.

Glad I could help. And since you used the in-game importer, your item will have a nifty gold star which makes it 10x easier for valve to implement.

If you need help compiling via the new importer, you can check out this guide: http://steamcommunity.com/sharedfiles/filedetails/?id=155101824

Also this is important, when you click "preview", jigglebones won't work. You will need to hit finalize and then load up your compiled model using the testitem map. This is a bug with the previewer, so you're unfortunately going to have to test the jigglebones after you finalize.

Don't use the SourceSDK item test to compile. I have never mentioned the SDK itemtest in any of my tutorials because it can't compile correctly. Use GUIstudioMDL to compile manually, but even then I don't think I'll be answering any questions regarding manually compiling anymore since the TF2 team directly said it's not worth your time.

Use the in-game importer to compile.

I would suggest making your model and setting up the jiggle bones, then export your model to .smd format. When you have the lods and textures ready to go, open up TF2 and use the new beta-importer to import your model. Before you compile, click the "Edit QC" button to enter in custom QC lines which would correspond to your jigglebone.