Okay, I've got my files like this now:
SD\3ds\Kurok.elf
SD\3ds\ctrQuake\id1\
SD\3ds\ctrQuake\Kurok\
SD\3ds\ctrQuake\ctrQuake.3dsx
SD\3ds\ctrQuake\keyboardOverlay.bin
SD\3ds\ctrQuake\touchOverlay.bin
SD\3ds\ctrQuake\ctrQuake.smdh
SD\3ds\Kurok\Kurok.3dsx
SD\3ds\Kurok\Kurok.smdh
Still no luck. I then tried moving the Kurok.3dsx and Kurok.smdh files into SD\3ds\ctrQuake\, but then Kurok doesn't show up in the homebrew launcher. It's weird because ctrQuake's .3dsx still shows up here. I also noticed that while I can run the CIA version of ctrQuake fine from the homescreen, running the 3dsx version from the homebrew launcher gives me the same error as Kurok has been.
I had my files placed in the original way because of this line from the Kurok release thread:
Installation: Put the Kurok folder inside /3ds/ctrQuake and the 3dsx, elf and smdh files in the 3ds directory.
Just to get things straight.
You should be able to start the ctrQuake.3dsx without any problems.
You should be able to load the Kurok mod with the help of an .xml shortcut.
You got all the files at the right place.
You can delete the .elf file, it's not needed.
It also shouldn't matter which *Overlay.bin files you use. Havn't tried the custom ones, but you should be able to place them in your 3DS/Kurok folder. But that's just a guess since i don't know which changes are made before compiling kurok.3dsx.
Are you able to load other .3dsx files without any problem?
My guess would be that there's an other issue, not releated to ctrQuake, which is causing these problems.
I havn't been able to replicate the issue on 3 different systems.
The only time it crashed for me is when i tried placing the .3dsx in the /3ds/ folder, but even than it loaded up and just crashed when selecting 'new game'.