You need at least Blender 2.80. Your error message shows that you are using 2.79.

What I have in my head is that the compiler does indeed create transforms for each bone for each frame, regardless of the input data. Perhaps that is no longer true, though? Or perhaps I am just remembering this wrong...

One exporter optimisation that already exists is not writing a keyframe if a bone hasn't moved this frame (I did this to reduce export times and file sizes). So you could test your theory by exporting two animations from the same armature: one with a single moving bone, and another many moving bones. Then compare the size of the compiled output.

In terms of how to approach this, I would add a pre-processing step that finds keyframes with linear interpolation and for each one records the target bone and time range to the next keyframe. Then areas these can be easily skipped during the export loop (see export_smd.py line 2047).

Textures can be stored anywhere, named anything, and are not part of the model.

Each material is imported, but it is up to you to provide textures files and/or shader settings.

This file contains two different skeletons as children of the root skeleton. That seems wrong, does it even compile? Where did you find it?

The decompiler should have generated them for you.

There are no reference mesh files in that folder. All you have is the compiled model, a QC file, and some placeholder animation and flex data.

That would explain the error. It will be fixed in the next release, but the import will leave you with an empty scene!

I need the QC and DMX/SMD files you are trying to import. You can use any popular cloud file storage service, e.g. Google Drive or Microsoft OneDrive.

I just pushed changes to GitHub which include support for ModelDoc corrective shapes. To enable it, either set your engine path to HLVR's bin64 directory, or manually select "Model 22 (ModelDoc)" as your DMX format.

Please let me know if this fixes the problem, and whether there is anything else that the Tools could do to make life easier in this area.

This should be fixed if you download the unreleased version of the add-on from GitHub. I'll push out a new official version soon.

Please upload the QC and models that you are trying to import.