This is probably the easiest fix.

• Open a Windows File Explorer session and point to your Steam\SteamApps\common\SourceFilmmaker\game\usermod folder.
  
• Find the Gameinfo.txt File and open it in a text editor like Microsoft Notepad or Notepad++
  
• Scroll down through the file and find the heading Searchpaths. These are the commands that tell SFM where to look for your assets and materials and the priority that it looks for files that have conflicting names. The GAME commnds at the top of the list have a higher priority than the GAME commands at the bottom of the list.
  
  
  
• Now cut and paste the GAME Workshop entry above the GAME tf_movies entry
  
  
  
  DO NOT PASTE IT ABOVE THE
  
  Game |gameinfo_path|. entry,
  
  This must always come first or SFM WILL CRASH when you load it.
• Save the file back into the Usermod folder.
  
• You will have to close and restart SFM in order for the changes made to this file effective

[/b]
The next time you load SFM, Your workshop files will be read before the original materials in the TF folders and that SHOULD make the download Workshop materials work.
[/list]

Pros
Workshop files are loaded before original game files ...
If the Author updates the materials, updates will automatically be downloaded and applied

Cons
Workshop files are loaded before original game files....

This is a 2 edged sword, if you've downloaded a custom made skin for an original game model from the workshop, that skin will be loaded instead of the original skin. Models can not wear multiple but different skins that use the same name. This is why there is a hierarchy so that identical naming conventions don't collide. The only way to fix this situation is to decompile, edit and recompile the model (which is how I got the two skins to work in the picture above).

This is also a quick method for fixing the situation. But it is NOT a permanent solution.

The problem is that SFM KNOWS what what the CRC values are for the content it installs. If there is an update or you have to validate your local game cache, SFM will flag the changed files and reinstall the original content thus deleting any of the changes you have made.

Process...

• Open the Workshop folder in your favorite File browser (MS File Explorer) and point to the location that the workshop has placed the materials.
  
• Select the files, right click and select Copy.
  
• Now find the location of the original material files in the TF {or other game} Folders, Right Click and Paste.. Select REPLACE Files.
  

If you have SFM open and the model loaded, you should be able to type mat_reloadallmaterials in the console and the replaced materials should load.

Pros:
Only files you replace will be affected and will be available when the model loads.

Cons:
Edited files will be replaced with SFM updates, SFM Local Cache Verifications and Reinstalls

This fix is similar to Fix #2. The difference being is that you are adding a new folder to SFM to hold Custom Content. The process is a little bit more involved and involves creating paths and editing the Gameinfo.txt file.

Process...

• Open a File Explorer session and point to the location of the Workshop Files.
  
• Open another File Explorer session and point the the SFM Games folder
  
• Right click in the folder and select New, then Folder and give the new Folder a name. (I called mine TFWorkshop)
  
• Now browse into the new folder and create a Materials Folder
  
  
• Now here is where things get a little tricky. You have to create the exact same path off to the item that exists in the workpshop folder. I'll use the materials for the mohawk to do this.
  
  Looking at the path off the Workshop Folder the material path to the Mohawk is
  materials -> models -> workshop -> player -> items -> demo -> short2014_demo_mohawk
  
  
• Switch back to the new folder you created and create that path in the folder, then copy and paste the materials from the Workshop path to the last folder you created in the path under your new folder.
  
  
• With the files now in the new loacation point your file brower to the Usermod folder and open the gameinfo.txt file in a text editor like MS Notepad or Notepad++ and scroll down to the SearchPaths section.
  
  
• Add Game (then tab across and add the [name of your new folder] ) TFWorkshop (in my case) above the TF folder listed in the section. Then save the file.
  
  
  You will have to Restart SFM for the changes to take place after editing the Gameinfo.txt file. Once restarted, the materials placed in this folder will have a higher level of priority than the original materials.
  
  Pros
  Only materials added to the folder will be changed
  Maintain integrity of the local game cache
  Won't be over written if SFM is updated or validated
  
  Cons
  If an SFM update or validation is done, the folder may have to be readded to the gameinfo.txt file
  Materials have a higher level of priority than the original TF materials
  If the workshop file is updated, the update will not affect this file (unless you set up some sort of sync routine)
  
  
  

Sorry folks, this is way beyond the scope of this document. If you want to do this, then check out some of my other guides on using Blender.

Try to repair the hat yourself.

This is an example of what the original texture for the hat look like and what the fixed texture look like.
Each problem material has its own quirk that has to be research and fixed. It could be as simple as turning on or off a $ command in the VMT, to as hard as reconstructing the VTF. Some fixes are simple, others are darn near impossible to figure out.


Pros
You learn how to fix materials and don't have to wait or rely on other people to fix things for you.

Cons
Some edits take a lot of time, reseach and other programs to fix.