You are very close, but instead of extracting the .ncs file, you need to extract the .nss file. The .nss files(the source scripts) are written so that humans can understand them, and the .ncs files (the compiled scripts) are compiled versions of the .nss files that only computers can understand. Editing the .nss files are not too hard if your only making simple changes to things like the damage done by grenades (the gamemakers left plenty of comments in the code so you can't get completely lost). Once you have finished your changes you need to compile the .nss file into a .ncs file (and there are several tutorial out there to do that). But I would just listen to bendarby24's advice and take the files you need from his mod.
Also, what problems did you have making a new item, I could probably help you with that as well.
Well, thank you very much! I finally was able to do it myself, with your explanation and some tutorials over at Holowan Labs. I modified Mira's rockets so that they do much more damage but also have a smaller area of effect, it works perfectly just how I want it to now. KotoR Tool was a bit screwy to start with but I kind of got the hang of the very basics of script editing now. It was actually kind of fun, I actually might try some more modding in the future