I have identified the problem myself *finally*, but have ran into a second problem.

If you use the Divinity Engine to build your stat Equipment set that you want to use during character creation and starting equipment, character creation does not recognize it, and the reason is the Editor autowrites in the Equipment.txt file as follows:

Code
new equipment "EO_Class_Set_Blood_Sourcerer"
add equipmentgroup
new equipment entry "EO_Fellhyde_UpperBody"
add equipmentgroup
new equipment entry "EO_Fellhyde_LowerBody"
add equipmentgroup
new equipment entry "EO_Fellhyde_Helmet"
add equipmentgroup
new equipment entry "EO_WPN_Fellhyde_Staff"
add equipmentgroup
new equipment entry "CONT_Backpack_A_SourceHunter"


Having downloaded someone that made their mod WITHOUT using the editor, that successfully uses a custom equipment set for their class I looked at their Equipment.txt, see below:

Code
new equipment "Class_Civilian_Start"
add equipmentgroup 
add equipment entry "ARM_Civilian_UpperBody"
add equipmentgroup 
add equipment entry "ARM_Civilian_LowerBody"
add equipmentgroup 
add equipment entry "WPN_Dagger"
add equipmentgroup 
add equipment entry "ARM_Ring"


You can see the difference of course: the Editor automatically uses the phrase "NEW equipment entry" when it should say "ADD equipment entry."

Thus I simply manually fixed the Equipment.txt file (which you will have to do _every time_ you edit equipment sets using the editor). So, that is resolved, by manually fixing a bug.


Now, the new problem: all my custom armor pieces won't appear as the model they should (in equipment preview; but when equipped work correctly). I'm still troubleshooting it before reaching out.