Important information about file size.
The boats that come with VSK 5 have their colour scheme created by skin files. The Acc Boat skins kept are in a folder at the address Program Files\32nd America's Cup\GameData\Skins\Boats\Acc. Downloaded Acc skins should have their zip files saved into this folder. The original game files are very large - about 11MB. If you make your own skin, you will want much smaller files than this (2-3 MB), so that other players can download them in the time available in one race. If you unzip one of VSK's original skin files, you will see the dimensions of the .dds files. The hull.dds file for example, is 2048 x 2048 pixels. For your own skins, you will want to make files that are all half the size of the originals (except the icon.dds file - which is retained at 256 x 256 pixels). The spinnaker .dds file and template provided in these notes are both correct and do not need any further reduction in file size. Check carefully if you use other skins or templates to make sure they are not too big, otherwise the skin may not have time to download during the race.
The files should be the following sizes in pixels (you can change their sizes in Photoshop using the top menu [Image] / [Image Size]:
Hull.dds 1024 x 1024, Sails1.dds 1024 x 1024, Sails2.dds 512 x 1024, Spi2.dds 512 x 1024, TeamMate.dds 512 x 1024 and Icon.dds 256 x 256.
Starting Out - Making a change to an existing skin.
1. Get the software. I use Photoshop so my notes refer to this programme. To keep the cost down, you can use old versions of Photoshop or you can use other programmes, such as Paintshop Pro or GIMP (which is open source), but I dont have experience with these. There is a great guide to GIMP in the VSK-AUS forum. Lots of the info there is relevant to Photoshop users too and there are many screenshots to illustrate the points. There is also a fine article on the subject in Ronin's Website.
Photoshop needs a plug-in (dds.8bi) to enable it to handle VSK's image files (.dds format), which can be downloaded here. Once you have it, place it in the Plug-ins Folder in your programme. In my Photoshop CS2, it goes in C:\Program Files\Adobe\Adobe Photoshop CS2\Plug-Ins\File Formats.
If you want to install nVidia's complete Photoshop Plug-ins programme, you can download this from their website here.
2. Find a skin you want to change. You can change any skin and save it under a new name for use in VSK. It is better to make sure you have the permission of the maker of the original skin to do this. Here I am going to use 'White Rabbit V' which is easy to change because it is a white boat with transparent sails. If you don't yet have a skin you want to work on, you can download the Spinnaker file for White Rabbit V by clicking here and use that.
3. Unzip the skin. Unless you have decided to work with my White Rabbit V Spinnaker, use Winzip to unzip the skin file you have downloaded. Make a new folder called 'My Boat' for the unzipped contents on your desktop, or any other place you prefer. On opening this folder, you will see six .dds files (Hull.dds, Icon.dds, Sails1.dds,Sails2.dds, Spi2.dds and TeamMate.dds).
4. Put a logo on the Spinnaker. 
Download a logo for this tutorial by clicking here. Use right-click & Save picture in the 'My Boat' folder along with the dds files. Now launch Photoshop, browse to the 'My Boat' folder and open Spi2.dds. You will be asked if you want to display the Mipmaps. Say 'No' to this and the spinnaker file will open. Now in the same folder, also open Logo_Rabbit.jpg.
Now use the Magic Wand tool to select the white area of the rabbit logo and use the top menu [Edit] / [Copy]. Click on the spinnaker window and use the top menu [Edit] / [Paste]. A new layer will be created containing just the white bits of the rabbit logo.
Again use the Magic Wand tool to click on the white area of the rabbit inside the spinnaker window, which will select the logo.
Now click on the Channels Tab in the Layers window. At the bottom, you will see a channel called Alpha1. Click on it to highlight it and the spinnaker will show in monochrome. Use the Paint Bucket tool to fill the highlighted area of the logo with white.
Use the top menu [File] / [Save As...] to save your work as 'Spi2.psd in the same 'My Boat' folder.
Now you use the top menu [Layer] / [Flatten Image] and then [File] / [Save As...] to save it as 'Spi2.dds' and a dialogue box will appear. Click the button to select the save format [DXT5[ and check to make sure 'Generate Mipmaps' is selected. You can see how it should look by clicking on the thumbnail to the left. Click on 'Save' & the file will replace the original one.
5. Make the new Skin. Now you collect all the .dds files in a zip file. Use Winzip to create a new Zip file with your own skin name (eg MyBoat.zip) in the location Program Files\32nd America's Cup\GameData\Skins\Boats\Acc. Add all the six .dds files in the 'First Acc' folder. (Hull.dds, Sails1.dds, Sails2.dds, Spi2.dds, Icon and TeamMate.dds). It's important that these final .dds files have exactly these names when you make the zip file. The other boat models have different dds file names from the Acc and you need to ensure that you use exactly the correct names for the appropriate model before you zip the files.
6. Check the result. Start VSK5 and go to Settings to select your boat. Of course, because you have not changed the icon.dds file yet, 'MyBoat' will have the same icon as the original. You should see your new spinnaker when you play the game.
7. Make more changes. Use the same technique to change the other files to your preferred design. Each time you update your Zip file with any change to a .dds file, you may find that you need to reselect the boat in Settings, depending on whether VSK was open when you made the change.
For information about templates & making more complicated skins, see the Template link on this site.
Note about Mainsail logos: The left side and right side of the mainsail & genoa 
are shown separately. The logo should be created on the sail on the left of the sails2.dds file. Then make a duplicate layer and use Edit / Transform / Flip Vertical to get the logo the correct way round for the other half and move it into place.Click the thumbnail to see a larger picture of the procedure.
___________________________________________
Avatar with
Transparent Background
Make this: 
...................... Into this : 
For use use in the game chat or in intro pictures. if you want your avatar logo to have a transparent background, then this method will work with Photoshop. There must be a more simple & elegant way - tell me if you know it!
Create your picture in a psd file. Make image size 128x128px. Select the part of the image you want visible & copy & paste it onto the top of an original vsk avatar (one of those fishes).Your selection will appear as a new layer. Now make the background (fish) invisible (dont delete it) and you are left with your own picture as the only layer visible. Do not create an alpha layer. Do not flatten the layers.
Now click on save as... and make the file .dds. The warning will come that it must be saved as a copy and the warning triangle shows against layers (because we have not flattened the layers).
Accept the default name for the file meantime & save. You can always rename it later. In the Save menu, select DXT 1 (1 bit alpha) and 2D Texture.You should now have a .dds file with the logo on a transparent background, for use in VSK.