That's a good insight -- it's important to name and reference Character Folders correctly. But the specific problem here is a very simple one: file extensions.
[USER=116386]@lich69[/USER] has used the "hide file extensions for known types" option in Windows. Notice that the Talon file appears in Windows Explorer as simply "Talon" rather than "Talon.swf". Notice also that the thumbnail is named Thumb.png.png. You can see filename errors in the Notepad++ screenshots also.
Thus, the actual problem is that there's no Code.txt file, nor is there a Mods.txt file. There are files named Code.txt.txt and Mods.txt.txt, but the Loader code won't bother to look for those. So the game "loads" the Character Folder, but finds nothing inside.
[USER=116386]@lich69[/USER]: you'll need to rename your files in order to remove the duplicate file extensions. I would advise you to change your Windows configuration so that filenames are always shown. It will help to avoid errors such as this one, and it will give you slightly more control over your PC (e.g. when you compile a Loader mod and then want to change its file extension from .swf to .mod).
Also: you should shrink or crop your thumbnail image. That image is absurdly large and SDT will show only a tiny distorted copy of it.
Also also: bodyscale:2 is an extreme setting. Fortunately the game clamps the values into the normal range (0.95 ... 1.075), so you won't actually see a giantess on-screen and your game should be playable as usual. But now I'm curious about how you even generated such an extreme charcode :)
