Ok, I go over it in a more step by step way.
Make a copy of your module so that we can test it without messing with your base until we set.
Now do you only have the old dmfi system installed?
If you do then yes overwrite all the files, I used some of there scripts and updated and made changes to them and add some others.
with the erf version the dm icons are not overwritten so you have to put the two of them into your override if you want to see icons. To get the scaling in you have to put the apptail.2da into the override also. This is a custom .2da it does not override any bioware stuff and just match up with the appearance.2da and tails for a easy scaling function.
For color text go to module advance / variables and put in ColorSet string 0@P`p€‘¡°ÀÃà ðÿ and paste this in with one space in front.
Look at the sample module that comes with the download to compare your setting with it and to see what all imported.
In the module events you need to put hr_speak for dm and play chat commands. This is the only script in the module events.
When you play a dm choice dm tool 1 that all dms have and target anything you should get a conversation put up.
If something not working give me more detail as to what not working.