After asking Demented for help on how to place in game textures onto custom items
i have made this short tutorial in both our names "wraith & Demented" we are people who like to help others.
Step 1
Select the side you want to skin, like in my example below.

Step 2
Find the texture you want to use from the game textures, when clicking on it you will see it wrong,
too big or wrong way around, like the image below.

Step 3 and 4
Click on the Paint Brush Icon "custom uv mode" doing so you will see a little box appear around the
texture you picked !

Step 4 extra help ^^ see the little box as 4 square dots ! move them to the edges of your
texture where you would like them to appear at the same time look at the hi-lighted main area on the custom item !
this will show you whats going on.
also the image maybe back to front or upside down just move the dots around or use the icons below the paint brush
icon, when you happy with it. hit the save.
Updated with next part below to add an icon to your image folder
have fun