The current STEP 220.127.116.11 guide says to install both the Complete Crafting Overhaul main file and the CCO Compatibility Patch for WAF True Weapons optional file and this is how I have my profile setup.
STEP recommends the Complete Crafting Overhaul main file and the CCO Compatibility Patch for WAF True Weapons optional file.
It doesn't really matter if you merge the patch into the main mod or install it as a separate mod. If you're using the Download with Manager button on Nexus, Mod Organizer will ask if you want to merge it into the main mod. If so, just click Yes. If you're downloading the files manually, Mod Organizer will most likely install this as as a mod named "CCO - WAF True Weapons Patch" without prompting you to merge. In the end, there's really no difference so I wouldn't worry about it.
The STEP Extended Patch is installed when you install the STEP Compilation mod in 2.N. Patches.