NPCs spawn but A Pose for a second or two when they get close to you, also after shooting for a few seconds. It's not game breaking, but it's ugly to look at and takes a lot of the fun out of the mod. So really it kinda is game breaking. Doesn't matter if you spawn HL2 NPCs or custom ones. They all A Pose whenever you make eye contact with them. It was funny at first because it was only a few every so often but now it's literally every NPC.