your BS2 archive has both textures and materials in it, you need to split those into two archives one Main, with no compression, and one Textures with general compression.
the bs2 is absolutely needed. loose files mods should be discouraged since they contribute to problems, such as increased load times and potential microstutter, related to the longer loading times. the dds-enabled bs2 format is designed to stream textures faster than if they were in a general bs2 or especially loose form on a non-ssd hard drive.
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But I did what you said just in case.