The different body parts already have materials set up for them, so you can just select a body part, go to the material tab at the top of the right-hand panel and change the diffuse color
Then for the torso decal, select the body, go to it's texture tab, which is next to the material tab, scroll down to the 'Image' category and click 'Open', then search for the torso decal you want to use, however, you'll need to get the decal image from the ZIP file it's in
To see the blockhead with the decal, you'll need to go to the world tab and enable ambient occlusion and set it's factor to 1.00 and enable environment lighting, then press shift and z while hovering over the 3D view to change the display mode to rendered
There's no easy way to use face decals nor any accessories unfortunately
