Could instance.new spawn any models instead of blocks?

Yes. There is a service named InsertService, and can be used to Insert Models, Meshes, etc.

Code for InsertService:

local InsertService = game:GetService("InsertService")
local id = -- your id --
local Model = InsertService:LoadAsset(id)
Model.Parent = workspace

If this doesn't work, alert me.

Cloning to be exact. Have whatever model you want to clone in Replicated Storage First, you would have your click event then inside the code you want to define your model and clone it like this:

local item = game.ReplicatedStorage.item
local clickDetector = script.Parent

local function spawnitem()
    local spawning = item:Clone()
    spawning.Parent = game.Workspace
end


clickDetector.MouseClick:Connect(function()
    spawnitem()
end)

Edit script if needed.

You could put the module you want to insert in server storage and then copy/paste in this code into the script:

function insert ()
local copy = game.ServerStorage.InsertItemNameHere:Clone()
copy.parent = game.workspase
end

script.parent.MouseButton1Click:Connect(insert)