I went over the entire installation with someone willing to help. I started from clean slate - standalone version of the game and patched the DLLs - that works.
As soon as I add assets or model folders into the game data - Mods breaks.
I tested this both on main PC with Win10 and Win11 laptop that never ran the game. And I did patching and clean slate install on both systems just to be sure (I guess I haven't looked into cleaning the windows registry). I presume something is off with my install but my "usual" suspect of locale (similar to how japanese games want to be run) or non-english letters in paths - none of that helped so far.
EDIT: for the sake of completeness (and maybe even win11 laptop has some unknown "taint") - I'll try clean Win11 VM just to be sure.