I haven't tried it myself yet as I was unable to find the official template skins (and I don't wanna base my skin on one made by another user) but have you followed all the exact steps from the readme file? It contains some more information like that the skin has to be named after your hero etc..

I followed the steps that are in the readme file. The face picture does not show up so that I can even make a character with that name.

Incidently, the skin I downloaded was from the Ironworks Gaming site (the official Darkstone site - although they are no longer supporting it).

I figured out how to use the skins. Once you follow the steps to name the skin after your character, you have to start a new game, click on the existing picture of the classification (ie thief), name the character the same as you have named the file, and voila, the picture changes to the new skin!