Figured it out. It did crash when following these steps in my tutorial:
http://www.frictionalgames.com/forum/thread-17299.html
BUT, when you get to the part where you change the directory of the image file, you cannot simply make it "<init_from>IMAGENAME.dds</init_from>"
It has to have the FULL DIRECTORY. For example, I have a custom story folder holding the new grunt texture and model:
<init_from>file:///C:\Program Files (x86)\Steam\steamapps\common\amnesia the dark descent\custom_stories\TestingMap\entities\servant_grunt_new.dds</init_from>
After putting the whole directory like so, it loaded in the ModelView just fine.
Hope this works for ya!
Let me know if it works so I can properly update the tutorial