@Sith Holocron requested that I go into some general detail for the community about why the Steam Workshop is generally bad for modding, both to have all the issues laid out and easily referenced, and to clarify some common misconceptions. I can't count the number of issues I've had to troubleshoot as a result of the Workshop and I know its systems and limitations in detail, so I feel fairly qualified to explain what makes the system inadequate compared to the standard methods the community uses for mod installation.
I'll first briefly explain how mods installed from the Workshop work, then detail situations where using the Workshop is sensible before explaining why using the Workshop is generally not a good idea. If you'd only like to see an explanation of why you should be downloading mods manually, skip on down to section #3. If you don't use the Steam version of the game with the most recent (Aspyr) patch, needless to say this doesn't really matter for you, as you don't have Workshop support for your title anyway.
How the Workshop Works
First, it's important to reiterate that the Workshop is only available on the Aspyr patch of the game, the most recent update presently only available on Steam. This update causes not a few issues, which means that even if you own the game on Steam you might want to revert it even before considering modding; an inability to apply new textures to lightsaber hilts, the loss of fog effects, and sometimes extreme game stuttering are but a few of the issues the Aspyr patch causes (though, in fairness, it of course also introduces many useful conveniences, including native widescreen support and controller support).
To the topic at hand, however: on a basic level, the Workshop is just a download system for mods. It doesn't truly "install" them as such, as the TSLPatcher would do, it just takes stored data from archives and puts them in a repository which the Aspyr-patched version of the game can read. For example, if you install TSLRCM and two texture mods, the Workshop will take the file data from TSLRCM and those texture mods and separately store them in a containing folder, which the game will then read on startup. A few of you might already see the problems with this, but we'll get into that in a moment.
What the Workshop is Good For
Jokes of "nothing" aside, the Workshop is actually very good for single-mod installs. If you want to use TSLRCM and only TSLRCM, go for it--the Workshop will download it and you can run it with no trouble at all. The TSLRCM team even realized that this is a much easier and more foolproof method of installation for many users, which is why the Workshop version remains recommended. And, so long as TSLRCM (or TSLRCM + M4-78) is the only mod you're using, it truly works fine. The issue comes in with multi-mod setups, which is how we get to....
Why You Should Avoid the Workshop
Put simply, the Workshop was not well-designed when it comes to multi-mod installs, especially in the face of the array of tools the community has developed to encourage mod compatibility over the years, the TSLPatcher being foremost among them. For those that don't know, the TSLPatcher can append strings or modify individual lines within existing files (among a myriad of other things), which allows mods which would otherwise directly overwrite the same files to work together fine, so long as they're not editing the exact same data within the same files. Not only does the Workshop not have this, it also lacks a stunning array of other common-sense multi-mod features:
Load orders are based on the order mods are subscribed to. This is a big one. Even the most archaic games have always allowed users to control file overwrites, deal with compatibility issues, and selectively prioritize one mod over another by controlling the order in which mods are installed, and oftentimes the specific files installed from mod to mod. Because the Workshop does not truly install mods as such and instead merely sits them in a folder to be read by the game, it's up to the Workshop which mods get read in which order, and which get prioritized. Mods subscribed to first are read first by the system, but because they're downloaded as complete packages ready-to-launch, it's not possible to remove files selectively unless you know exactly where to look--even then, the Workshop may try to repair your install of the mod, replacing files that you may have removed intentionally. Furthermore, no file manifest is given by the Workshop, which makes it that much more difficult to see which mods edit the same content, and incompatibility is a major systemic issue with the workshop as we'll see.
One mod's changes can push out another's. Unlike the installation system typical with major mods where the TSLPatcher can minimize incompatibilities, there's no such protection here. Indeed the opposite, as having two mods with the same .2da file means that one's will inevitably win out, and the other's will lose, and the loser's data will be completely and totally ignored by the game. Not only does this guarantee that some mods are incompatible in function simply due to the Workshop's architecture, it means that you could encounter serious bugs if important files from one mod are overwritten by another. This is part of the reason why TSLRCM and M4-78 had to be combined on the Workshop eventually--despite being completely compatible with one another, the Workshop was ramming them together in incompatible ways.
Mods installed manually don't play well with Workshop mods. Jumping off of the above, because mods aren't truly installed with the Workshop, a user can mod their game by installing files onto their game directory in steamapps/common as one would normally do, but also subscribe to mods on the Workshop. Yet the same issues as two mods editing the same file on the Workshop will now occur in this scenario: a loose .2da file in the override will conflict with a .2da file from a Workshop mod and one will completely cancel out the other, rather than taking each other into account whatsoever. This is a big reason why it's a good idea to do all one thing or all another, since combinations like this are invariably more work than simply modding with the right tools from the start.
The Workshop has limited selection, and few exclusives. This is an indirect rather than direct issue with the Workshop, but it's worth pointing out all the same. Because of many of the above issues, the Workshop has a rather limited base of modifications, and most modifications released on the Workshop have also seen standard releases, either here on Deadlystream or on the KOTOR 2 Nexus. Because those mod versions would be more compatibility-friendly anyway, there's little reason to use the Workshop just for the sake of the mods on it; there's more variety and less headache installing mods elsewhere.
While the above is by no means an exhaustive list, it does represent the bulk of the problems with the Workshop. I want to reiterate a final time that the Workshop is an easier install method, as it's a simple one-click solution, but, much like the dark side, it's an easy path that often brings its own problems down the line. It's never worth it to use the Workshop for a couple of mods only to find out that you have a serious incompatibility late into the game, and no clue how to resolve it. Manually downloading mods isn't much more difficult, and neither is their installation, while the compatibility benefits from doing so are significant. I hope this post has helped explain exactly why that is, and encouraged you to look into a traditional install instead.
If concerns about compatibility now seem significant to you, or if you're new to modding and worried you'll simply be overwhelmed by the install process for mods, I (though biased) strongly recommend the mod builds on the subreddit. As fully-compatible mod lists, you won't need to worry about crashes from their use, and all the mods listed come with detailed instructions where necessary; spoiler-free builds are even available if you're a first-time player. With the builds as an option, there's really no reason not to skip the Workshop in favor of a much more content-rich and stable experience.