The material error is caused by not saving your material inside your the editor data folder, specifically <SteamApps>\common\Divinity - Original Sin\Data\Editor\.
You *must* save it in one of its subfolders, preferably Editor\Mods\%yourModName%\Assets\Materials.

Normal maps must be saved using "pure" DXT5, not DXT5Nm.
DXT5Nm swizzles the color channels so the normal map uses alpha instead of the red channel, but D:OS expects non-Nm normal maps, so don't use this format.