Some files are actually duplicates of the TSLRCM override folder.
As far as I can tell most files that come with the Steam update are for the controller support. I do see a handmaiden.dlg that's also included in TSLRCM, I think in this case (being a dlg file) the one from TSLRCM gets precedence. It can cause glitchiness with textures if there's 2 files with the same filename in 2 locations.
I also noticed that KSE does not recognize custom items if they are not in the "root" override folder.
True, it only looks there. You can copy your files to there, do your KSE thing and remove them again. Cut and paste should be ok too but you can easily lose sight of what came from where if you move a lot to the main override.