econundrum, I worked with Derek today on this. Looks like the problem has to do with how the game is reading the a space in the user name within the Windows file system. Mine, for instance has a space and the game doesn't like that. Anyway, they'll have to modify the DataCompiler batch file.
Anyway, I edited the batch file and... tada! mods work.
In the batch file there is a line:
SET moddir=%docsdir%\My Games\GalCiv3\Mods
Change it to:
SET moddir=%HOMEPATH%\Documents\My Games\GalCiv3\Mods
This should only work on Windows Vista and later (not on other OSs). There can be challenges if you have things pointing to different locations in your registry. In which case, they need to code in something that refers to shell directories in the registry, maybe. There are probably many ways to fix it; some less elegant than others. I'm sure they'll come up with something will work universally and for other OSes.
Also, to get other parts of the mod to work, you'll need to change the same line in other batch files in the Tools directory... Particle, Core, and Campaign compilers.