This tutorial is for face graphics using palletes with 256 colors, although it's mose like 16 colors 8 times. It'll make sense in context.
For this example, I am going to choose this good face. I don't know too much about this guy. I heard that he fought Okada and Kojima once, and may have been in a construction business with Tenryu, Chono and Mutoh.
Now the prep work. Open VPW Studio, load your project file, and go to Project -> File Table and go to the face textures starting at 1D72. Click on any Ci8Palette twice. It doesn't matter which, but make sure you use the same source for this whole process.
Here is what the 256 palette looks like. The first row of 16 is the palette that is used for color 1. The first 16 colors are the only ones that should be used in the face graphic no matter what the default palette for the character is in game. That is because the following 7 rows of 16 represent colors 2-8. The final 128 are unused, and all 0,0,0 but they are necessary for the 256 color palette needed.
Click on export, go to the directory that you want to use for your palettes. I'm going to save two JASC Paint Shop Pro palettes and one VPW Studio palette. (for this example I will save them as rock-16.pal, rock-256.pal and rock.vpwspal).
The reason I have exported two PSP palettes is that I want to have the colors for the file I am saving defined from 1-16. Any one defined as another color will look awkward in game. Since PSP palettes are text files, they can be easily edited. Go to paletterock-16.pal.
Note that the numbers are in the same order in the palette, all you have to do to make it into a 16 color palette is change the 256 on the third line to 16 and delete every line after (make sure to press enter after the final number so there is a blank line with no spaces otherwise it won't work in PSP)
Another thing that you may want to do to prepare is to rip the face textures with palette 1. There are several ways to do this. Go into VPW Studio, click a face file and extract to PNG, go in the emulator and use a plugin to rip the face textures from edit mode (remember to use a bald head, since you don't want any hair)
[OPTIONAL]
Now this is what I personally do to edit faces. This part is not set in stone, and others may have different ways. The main goal is to create a 32x64 face that looks good in the default 16 color palette.
Open the graphic you want to use in paint shop pro. Also open up one of the default faces which resembles the face you want to use.
Now play with some of the items in the Adjust menu to try to match the color of the face picture. I usually find the most success with Color Balance -> Manual Color Correction and Hue and Saturation -> Hue, Saturation, Lightness. It'll take a while to get used to, but the best way to learn is to mess with it. When you're done, load the rock-16 palette to reduce the picture to the 16 colors you want to use.
Choose Image -> Increase Color Depth -> 16 Million colors to get the picture prepared to be resized (with 16 colors it will only do pixel resize no matter what you pick). Crop the picture from the top of the head to the chin.
Then go to the default picture and copy/paste a picture and note the height (in this case 47). Go to Image -> Resize and use Smart size with Lock Aspect Ratio to resize it to a height of 47.
Load the rock-16 palette again, then a copy/paste as new selection, and using the layer view, I notice that I made it a little too big. Luckily I can do Edit -> Undo and redo the previous steps using trial and error, messing with other sizes and even changing the palette ratio. I eventually found that a 44x44 resize worked.
Now it looks a little awkward, but using the erase tool, soften, some editing and since it's a symmetrical face with shadow, I can cut it in half and mirror it. Again, a lot of trial end error here. And now we have a 32x64 face that looks good in the default 16 color palette so...
[NOW BACK TO THE STUFF NEEDED TO MAKE IT COMPATIBLE]
Take the 32x64 and load the palette rock-16 to define the colors as only 1-16, then load rock-256 to make it a 256 color file with the correct palette. Save it (I'm using Kiryuchan.png).
Go back to VPW Studio and find a face you are not using, for this project I'm using Face Male 87 (1E44/1E45). Also note you can use any face entry, as long as the palette is consistent with the graphic.
Go to the palette file for 87 (1E44), click right, go to the replacement file path and browse for the palette files you saved. Now the PSP palettes won't work in VPW Studio, infact the only ones that seem to work are the VPW studio luckily I remembered to save a VPW palette, so choose rock.vpwspal. Since the colors are the same, for all the palette files. Click right on the face graphic file for 87 (1E45) and browse for the file you made (Kiryuchan.png). Save the project and build the rom. The graphic should be injected, looking like this...
Now mess with the head size, and see how it looks. If you feel it doesn't look right, all you need to do is edit the graphics again as long as the file is the same name. Remember, you are loading all the files in a new rom, so VPW Studio is loading everything at the same time.
So this is my final output. What do you think Kiryu?