You can have two games modded at the same time. That's not the problem though. You must install it correctly for it to work. After the downgrade, you should be able to download mods and stuff. Just open up IMG Tool, remember to back up your files, then open the gta3.img, then click on 'Edit', 'Find', and type in katana.dff or katana.txd and click 'Commands', 'Replace'. Then find the modded katana.dff or katana.txd and press OK or whatever it says.