Open your Steam Library and change the filter at the top from 'Games' to 'Software'.
SFM is NOT a game, so you will not find it in your 'Games' list.

Right-click Source Filmmaker and select 'Properties'.

You will see this:
Click the 'Local Files' tab and then click 'Verify Integrity of Application Cache'.

You will have a window pop up like this:

When it's finished, it will look like this:
You will also note at the bottom that Steam says it's downloading, this is normal, it is downloading the files that failed to validate.
You will now have to re-enable any DLCs that you want to use or any custom folders that you may have in order to use them. Right-click on Source Filmmaker again and select 'Launch SDK':


You should see this:
Select 'Edit Search Paths for Selected Mod'.

You should now see this:
Select any and all folders that you want access to within SFM by putting a check next to them.
You can also click and drag them to change the priority of the folders.
Folders at or near the top of this list have a 'higher priority' than those below them.

I highly recommend that the top two folders always be 'tf_movies' and 'tf', after that, you can organize them in any fashion that suits you.

If you do this, anything that you download from the workshop will override (not overwrite, they are NOT the same thing..) the contents of the tf_movies and tf folders, resulting in some 'unwanted' side-effects...

Here's a video guide for those of you who are either 'reading challenged' or just too damned lazy to read the above guide... just kidding lol



As always, if you have any questions or comments, please feel free to post them below, I will try to reply as fast as I possibly can...