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This bug was missed because save_blend & keep_textures_temp settings were turned on during testing, which had preserved custom textures and materials. However, it was discovered that when these settings were turned off, custom textures & materials were getting deleted after the first item converted. This was due to 1) no fake users getting set, 2) fake users getting removed, and 3) purge orphans happening for every item converted. Custom materials & textures are now preserved throughout the conversion process.