3. Run NSMBU with Cafiine (if you don't know how to use Cafiine, look up a tutorial)
Super Fire Ice Penguin Propellor Acorn
The textures - mipmaps and such - work fine (though I haven't done extensive testing), so there shouldn't be any problems while using this mod apart from the lack of UI and object emblems to go along with the character.
Special thanks to the experts in the NSMBU Help thread, for helping me get the whole modding process in order.
You can use TexConv2 with a few QuickBMS scripts. TexConv2 is part of the SDK, and the quickBMS scripts can be found with google.
Those scripts convert bflim to gtx, then TexConv2 converts the gtx to dds, and then there's another quickBMS script that fixes the dds. Then you can edit the dds, and then do the whole process in reverse.
I made a script to extract all of the DDSs (Without the fix), here's a download. You'll need to make a TexConv2 folder in the same folder where the batch file and BMS files are, and put TexConv2.exe along with its DLLs in there.