For Paragon you take the romfs folder you've extracted and use it in projects that will output your edited files into its own romfs folder. For the project directories, "Extracted RomFS Directory" is where you insert your extracted romfs folder. Edits you make will appear as modified files in wherever you set "Output Directory" to.
Once you've made all the changes you want, you'll take your output files and put it into your 3DS's microSD so luma will apply it. This would usually be under "microSD\luma\titles\00040000000a0500\romfs". If that directory does not exist yet you can just create it.
Finally to enable your mod, open Luma settings (hold SELECT while 3DS boots up) and make sure to check "Enable game patching" (x). Then hit START to save and exit, and now your 3DS is running a modded Awakening.
You might have to manage having multiple mods yourself, some may modify the same files and will cause a conflict.