Since nobody answered yet, I can give my experience with the translations of mods, because most modding knowledge is keeped at discord this days & got some time to answer...

-----------------
For mod example let us use the Mod "Red Lotus" from "GhastRiv" because I just modified this hero for my own game (modified sprites, balancing & translation).

0. Best would be, to make a backup of the mod or his localization files, which you want to translate... just to be safe...

1. If you use steamversion for DD, go to the file steamapps/common/DarkestDungeon/_windows

2. There you copy this 6 files: fmod.dll, fmodstudio.dll, glew32.dll, localization.exe, SDL2.dll, steam_api.dll

3. The copy of this 6 files go into the localization order of the mod you want to translate (In our case The RedLotus_Mod, which has the workshop_id 2615347226)

You also have to remove/delete the 2615347226_language.loc files, which are there...

Personaly I remove all this old 2615347226_english.loc files (and the other languages) from the mod in a new created backup order, should something goes wrong.

4. You should now have the 6 files + redlotus.string_table.xml (which could have been modified for our example with a new translation for the hero name "Loli Gorilla-Chan" which we want to see in game)

5. Now activate the localization.exe... (You can use admin or not, seems it doesn't matter)

It should open a small dos_window showing you the program, working, and also close itself very fast, while you have now a new english.loc2 file in your localization order.

//Note: Depending on the size of the xml file you are translate the localization.exe is faster or slower...
Also if you delete some language in the xml file, that you won't need for your game like chinese/tchinese, the localization.exe will give out error messages in the dos_window for missing language, which can be ignored & you only just hit enter. It works anyway.

6. Now you have the english.loc2 file. This Makes 8 files if you have no other language in the xml data.

You have to ad the numbers of the old loc file (the mod id) to the new created loc2 file...For our example:

english.loc2 ---> 2615347226_english.loc2

The number is the PublishedFileID of the mod which can also be found in the Project.xml file in the Mod Order... This ID is the same as the workshops mod id you find here /steamapps/workshop/content/2615347226.

Make a copy of 2615347226_english.loc2 in the localization order.

Rename the copy of the loc2 file to loc... Simple ---> 2615347226_english.loc

At the end you should have 9 files in the localization order (if you only use english):
fmod.dll, fmodstudio.dll, glew32.dll, localization.exe, SDL2.dll, steam_api.dll, redlotus.string_table.xml, 2615347226_english.loc2, 2615347226_english.loc
-----------------
This is it... For our example, if you start the game & activate the RedLotus_Mod, the Hero formerly named Red Lotus should now appear in Game & Quest logs as Loli Gorilla-Chan

At least I worked with that route since today, which still works for me, because after many mods with blue_text or bad translations, which I don't like in game, I decided to translate for myself & friends.
------------------
Maybe it will help you and other user who want to translate the mods in their language too.
If their are still questions don't expect a fast response because my time is short for a visit on steam forums, but if you or other users follow this route it should work...

Absolutely incredible. Good to know that there is a modding discord as well. I tried looking online and found something in regards to "Moonlit Dungeon" but all the links were expired. If there is something more recent can you drop the link here?

Thank you very much for your time!

[Edit]
For anyone else reading this who is just looking to learn.
https://steamhost.cn/steamcommunity_com/sharedfiles/filedetails/?id=3166564317&searchtext=remilia

This entire mod is in another language from the looks of it, whether you speak French, Russian, German, Etc... This looks like a great place to start learning. (I know there is already an ENG loc for this but i won't learn if I don't try myself).