By the looks of things wih Kotor Tool you havent set the paths correctly. Unless your Kotor install is C:\ you will need to point the tool to the correct folder(s).
With KSE I have had that "error" message before with custom items. Mainly has to do with the icon not being in the main override folder as far as I can see. Just click ok to both pop ups, then click the add button and your item will be added to your inventory.