If there is 2 files with same name, the DDS compressed file is used. You can compress the large, medium, and window textures to DDS without noticing quality loss but I recommend any small buttons or pictures you leave pure TGA.

Gimp free will work fine and has a DDS add-on

Start with the large portraits. Once those are done, use those assets to shrink down to medium, small and button sizes. For large and medium I do half the body view, but for the window, small and button, I focus only on the head.

If you want to change the picture count or the texture sheets they use, look at the .playerPictures in the reference files Windows folder.

 http://soase.x90x.net/reference-files/Reference_Files_Reb_v1.5/Window/PlayerTech.playerPictures

Is there a portrait mod out there somewhere I could maybe dissect and mimic?

Do you have Gimp?

http://soase.x90x.net/reference-files/UI_Rebellion/Player_Portrait_Large.xcf

Includes a bunch of layers to edit separately, and masks in the channels tab. Youtube search Gimp Mask, it makes sure the transparent areas stay that way.

 Go to the channels tab and enable the edit mask, will show an eye icon and make the transparent areas black. That black area you do not want to have your pics on and will not allow it. Go back to the layers tab, copy an image and paste it into the Gimp scene (paste as layer), move to desired location and scale to fit.

Now all you need to do is crop the image so no transparent area shows inside the black space.

Saving the image with the edit mask on will not save the black area, it keeps it transparent. If you turn off the edit mask and save and the image is too big, it will cover your frame

Spacing and Unused Area layer: Turn it off, with the eye icon or right click and delete it. I used that to create the mask.

The more down the layer list your pasted layer is, the more underneath it is to the others.

Try turning off all the existing layers except your pasted layer, make sure the edit mask in the channels is on.

All you should need to learn for this in gimp is 
Move Tool
Scale Tool
Crop Image

Save as DDS or TGA 

Myfist0, could you explain the cropping part to me like you were explaining it to a small child? I definitely have the edit mask on. Also, I must be screwing that up somehow too. If I export it to tga format with the mask on, it does stay black in the new file. I need to go watch some more tutorials.

Edit mask is turned on in the channels to see the picture placement

Make sure your layer is selected, yellow dotted line.

Rectangle tool and size the image so it just fits.

Right click inside your selection, Layer --> Crop to Selection

Right click on your layer and Add Mask -> Saving Mask

 Export to TGA

I'm usually better when not asleep, and I am pretty new to Gimp myself. Edited above post to get you going till a proper tutorial is done. Get all the images you want in the gimp scene as layers and maybe I can help you more.

Awesome!!! I finally think I got the large portrait file right! If I open it and shrink it to the correct dimensions, I should be able to re-save it as the medium version too, right? I went to that reference file directory and downloaded the Player_Portrait_Button.xcf file, and I feel like I should be able to make the button file from that using the same method you taught me. I'm slightly uncertain about the window portraits and the small portraits. Is there a reference file for them? This is just within my grasp now...lol

You, sir, are my hero. I see the other files now. I will cherish them forever. So, if I had a mod set up like Mod Folder\Textures\portrait files in tga format and nothing else, would that work? Also, how many portrait sets can I add (Is there a limit?)? I'm trying to teach myself how to convert these files over to txt and back using command prompt. I feel like there are easier ways to do this as well.

Ah, ok. So, if hypothetically I add a new portrait to the end of each race's row (leaving the pirate stuff alone until I learn more about that), do I change the pictureCount to 9 and the rowItemCount for each file to 9 also? If I do this as you say, will it just give the computer more portraits to choose from for AI players, or will it recognize the new set and give me a new portrait set to choose from in the in-game player setup menu? (I think this ordeal is almost over!)

About the pirate stuff, I was skimming through another thread, and it mentioned something about the game only using the first portrait for them. I do notice a second portrait that I do believe I have never seen in-game. Do you know what's up with that as well?

Lol... I don't care so much about the pirate. To keep it simple for now, I'll probably just modify some of the default sets that I don't like. What about the counts though just in case?