Yes, it might still work.

Here's my advice:

Go ahead and use what Valve provided (for now). Model your items as you would normally, and rig everything normally. Then export your stuff and compile using the in-game compiler. If it works, then Valve must have updated/fixed necrolyte's model somehow. Otherwise I might have to look into it a little more deeply.

I don't work with custom animations, but you can just use the in-game animations.

Modeling / Exporting a weapon is a very similar process to hat making. The key difference lies in the fact that instead of using the bone rig of the character model, we will be using the bones of a pre-existing weapon that we want to replace. So for example, if we wanted to make a Sandman replacement, we wouldn't import the scout model, but rather the Sandman model to see what bones it comes with. The following is a process on how to export a weapon from Blender (c_models):

• Start a fresh, blank blender scene.
  
• Extract a model that you want to replace from the team fortress 2 materials GCF (tf/models/weapons/c_models). Make sure to grab the .mdl file and any associated file (.vvd, .phy, etc)
  
• Hex the extracted .mdl file by opening the file with notepad++ and changing the "IDST0" to "IDST,".
  
• Decompile the hexed model file to get your weapon smd file.
  
• Import the weapon smd into Blender.
  
• Make your model without altering the imported decompiled model, and when you are ready, superimpose your model directly on top of the decompiled weapon. Make sure the properties of your model are all normal (you can check this by pressing "n" and making sure your scaling is all 1 and your positions are all 0. If they aren't just make sure you change them, and then reposition your model in edit mode).
  
• Delete the decompiled weapon and assign the remaining bones to your model via the vertex groups panel. You can check to see that you assigned each bone to the appropriate vertex group via weight-paint mode. Melee weapons usually only have 1 bone whereas more complicated weapons will have a variety of bones that may or may not be shared between different groups of vertices. It is probably advisable to start with something simple like a melee weapon and work your way up to a more complicated model such as the huntsman (complicated!)
  
• Now that you have assigned the bones to your model, the process is the same as exporting a hat.

For more complicated weapons, you just assign your model to multiple bones. The flaregun is a good example: Most of the model is assigned to weapon_bone, but the trigger and barrel are assigned to other bones. When you compile your model, the engine will use the animations for the flaregun, and the parts corresponding to your model will animate automatically. Custom animations are much harder since you'll need to create animation smds and then have the engine recognize them via the QC file.

Very cool, Zoja... You're getting much better! :D

Some models supplied by valve in the workshop page are incorrect, however not all of them are. Since the last time I checked, Valve could have fixed Necrolyte's model in the workshop.

Did you first try to use the one supplied by Valve? I wouldn't decompile anything manually until you know for sure that it doesn't work.

Also: in what wa are the hands still in the incorrect positions? If you decompiled exactly as shown in the video, you should be getting the model that is in-game which means it's 100% correct.

.Smd files completely support transparent textures... You just need to give the transparent faces a different material name in Blender (from the material editor panel). When you use the in-game importer, assuming you assigned 2 materials, the importer will ask you to specifiy 2 textures.

Make sure your model is rigged to the bip_head bone. Also, use .smd format instead of .dmx format when exporting your model from blender.

It sounds like you aren't rigging your model properly. I would check to make sure your model is parented to the right bones, and then you can enter pose mode with the armature selected to test to see if it was correctly attached (in pose mode you can move around the bones and see if your model follows it). If it does, then you should be able to export correctly... also make sure that when you compile using the in-game compiler that you use a different file name each time. As far as I can recall, the importer is bugged and won't update the model if you use the same name.

When did 2.68a come out? It's possible that smd tools might need to be updated.

OK, join the blender chat room.

Edit: Actually, I'm going to be busy. Maybe I can answer this later.