I didn't know you kept up on the thread! And don't worry, I can understand why development is tough to have time for when you're you're busy with normal life things.

Glad to see some progress has been made too, hopefully you can make a breakthrough. I'm re-doing my explanation of importing character animations on the FP thread now, so at least people will have some hacky way of getting things to work temporarily. Best of luck with the development!

Cra0kalo's StudioMDL was released a little after SFM, but I haven't compiling anything for SFM myself.

You could try using Cra0kalo's edited StudioMDL found here[dev.cra0kalo.com], which bypasses bone, texture, and vertices limits. You will have to download the version called "StudioMDL +LIBS", extract it, then copy + paste to your Steam/Steamapps/common/Source SDK 2013 Multiplayer/bin/ folder, and overwrite all.
I'd also suggest setting StudioMDL to always run as Admin, then also doing the same for Crowbar.

As the title says, attempting to compile with the "Define Bones" option checked does not compile the model, regardless of any other factor.
This has only occurred to me on static props, and I have not tested this on ragdolls or other types of models.

You would need to create a QC file to define the parameters of the model, such as it's bodygroups, skins, what SMD files to use, etc.
From there, Crowbar takes this QC and the necessary SMD files and compiles them into an MDL with it's associated other files for use in the Source Engine.

I noticed it only happens to me if I have the "Define Bones" option checked, otherwise compiling works perfectly fine.

I'm not sure if this is the cause of your problem, but you are missing the c_pist_fiveseven.phy file from the VPK. Crowbar probably assumed that the phy file should be included and messed up when it couldn't find it.

Could you post the QC on Github? I can take a look an see what else might be wrong.

Crowbar typically "deactivates" the $definebone commands that help maker sure important bones are not deleted or messed with. Simply remove the "// " before the $definebone commands in the QC and recompile.

The only support Crowbar 2.3 and 2.4 have is that they can get the models extracted, just without working animations. ZeqMacaw said that the next release of Crowbar should support them. There is no known work-around.