HW2RM’s HOD format is different than HW2C (even with guys hacking at CfHODEd trying to pull data) - very old HODs in particular may not load in the engine correctly. It really shouldn’t relate to Square textures though - it is not a rule we enforce in the engine.
Almost without fail the main thing you (and everyone else) needs to do is dump your HODs to Obj/DDS/TGA and build them in Blender (the Blender->HW2RM process is going to be very, very solid I think, thanks to members of this forum!). That way, as the HOD format is changed, you’re a button-press away from working in the engine - not weeks of waiting for others to hack new tools.
Many Mod groups have asked for improved collision (as one easy example) - and when/if that system is put into place, it’ll be brand new data that HODOR puts into a new HOD format - old HODs will likely fail to load or collide at that point. Ditto for fixes to animated markers & joints, beam-driven scars, etc.