GAH!! MY BRAIN HURTS!

I looked at the code. Actually there wasn't much wrong. In the first loop, the Type that is filled in has another name than the Type that is created.
Other than that, I moved the file-reading to the beginning of the function, and added 'Delete Each TQuestion' for every 'Return' call.
Also I changed the loops to Repeat-Forever, and put the conditions (such as KeyHit(1)) that exit the loop in If statements.
In order to get it to work, at the end of the loop, I added questiontoask$ = followup$, so that the Function could search for the next question:

	Graphics 1024,768,0,2
	Const displaywidth = 800
	Const displayheight = 600
	
	Type TQuestion
	Field question$
	Field ans1$
	Field ans2$
	Field ans3$
	Field fol1$
	Field fol2$
	Field fol3$
	End Type 
	
	conversation("text.txt", "Hi")
	
	End
	 
;=====================================================================================================
;=====================================================================================================
;=====================================================================================================

Function conversation(filename$, questiontoask$)

	;read file data
	file = ReadFile(filename$)
	Delete Each TQuestion
	While Not (Eof(file))
		q.TQuestion = New TQuestion
		q\question$ = ReadLine(file)
		q\ans1$ = ReadLine(file)
		q\ans2$ = ReadLine(file)
		q\ans3$ = ReadLine(file)
		q\fol1$ = ReadLine(file)
		q\fol2$ = ReadLine(file)
		q\fol3$ = ReadLine(file)
	Wend 
	CloseFile file
	
	;create/load mouse image	
	gfxmouse = CreateImage(8,8);LoadImage("mouse01.bmp")
	MaskImage gfxmouse, 255, 255, 255
	
	;copy screen to 'bgimage'
	bgimage = CreateImage(displaywidth, displayheight)
	CopyRect 0, 0, displaywidth, displayheight, 0, 0, BackBuffer(), ImageBuffer(bgimage)

	;reset followup$	
	followup$ = ""

	;main loop	
	Repeat

		;----SEARCH QUESTION THAT MATCHES 'questiontoask$'----	
		
		;reset 'q' to empty before searching
		q.TQuestion = Null
		
		;scan all TQuestions
		For temp.TQuestion = Each TQuestion
		
		  ;if temp's question is the question to ask, then select temp and leave loop
		  If temp\question$ = questiontoask$ Then q = temp: Exit
		
		Next
	
		;if no matching question was found, leave function
		If q = Null Then Delete Each TQuestion: Return ;--> the question was not found
		
		;----USER INPUT LOOP----
	
		;select loop	
		Repeat 
		
			;draw 'bgimage'
			Cls 
			DrawImage bgimage, 0, 0
			;UpdateWorld
			;RenderWorld
			
			;draw mouse			
			DrawImage gfxmouse, MouseX(), MouseY()
			
			If (MouseY() < ((displayheight/4)*3)+((displayheight/4)*.3) + 12) And MouseY() > ((displayheight/4)*3)+((displayheight/4)*.3) Then
			Color 50, 50, 245
			Rect 0, ((displayheight/4)*3)+((displayheight/4)*.3), displaywidth, 12, 1
			Color 255, 255, 255
			EndIf
			
			Color 0,0,0
			Rect 0,0,displaywidth,displayheight/4,1
			Color 0,0,0
			Rect 0,(displayheight/4)*3,displaywidth,displayheight/4,1
			Color 255, 255, 255
			
			;HIGHLIGHTS========================
			
			If (MouseY() < ((displayheight/4)*3)+((displayheight/4)*.3) + 12) And MouseY() > ((displayheight/4)*3)+((displayheight/4)*.3) Then
			Color 50, 50, 245
			Rect 0, ((displayheight/4)*3)+((displayheight/4)*.3), displaywidth, 12, 1
			Color 255, 255, 255
			If MouseHit(1) Then followup$ = q\fol1$: Exit
			EndIf
			
			If (MouseY() < ((displayheight/4)*3)+((displayheight/4)*.3) + 12 +50) And MouseY() > ((displayheight/4)*3)+((displayheight/4)*.3)+50 Then
			Color 50, 50, 245
			Rect 0, ((displayheight/4)*3)+((displayheight/4)*.3)+50, displaywidth, 12, 1
			Color 255, 255, 255
			If MouseHit(1) Then followup$ = q\fol2$: Exit ;<----- added 'Exit'
			EndIf
			
			If (MouseY() < ((displayheight/4)*3)+((displayheight/4)*.3)+12+100) And MouseY() > ((displayheight/4)*3)+((displayheight/4)*.3)+100 Then
			Color 50, 50, 245
			Rect 0, ((displayheight/4)*3)+((displayheight/4)*.3)+100, displaywidth, 12, 1
			Color 255, 255, 255
			If MouseHit(1) Then followup$ = q\fol3$: Exit
			EndIf
			;====================================
			
			;draw optional answers
			Text 10,10, "" + followup$
			Text 250,((displayheight/4)*3)+((displayheight/4)*.3), "" + q\ans1$ 
			Text 250,((displayheight/4)*3)+((displayheight/4)*.3)+50, "" + q\ans2$ 
			Text 250,((displayheight/4)*3)+((displayheight/4)*.3)+100, "" + q\ans3$ 
			
			Flip()
			
			;Esc=leave function
			If KeyHit(1) Then Return
			
		Forever ;<------- changed to 'Forever'
		
		If followup$ = "" Then Delete Each TQuestion: Return ;<-----added 'Delete Each TQuestion'
		
		questiontoask$ = followup$
	
	Forever ;<------- changed to 'Forever'

End Function