Well I've been deep in the middle of doing this as well (as witnessed by the Hover Armor mod I posted). So I can provide some pointers I guess.
#1. While Piratez uses some custom pallets, you will be just fine using the ones that come with the sprite (or using the default pallets). But if your curious, they are in the Resources\Pal directory. Picking one to use is somewhat tricky, as which Palet is used depends on the mission, as you may have noticed. I think the "delicious" one is a reasonable default to pick though. (The default pallets are in the Common\Palettes directory if you like).
#2. The Unit Sprite tool is great for previewing a sprite sheet if you want to edit those (though I still mostly use asprite to modify them). I don't have a link handy, but you can find it with the search function.
#3. Layers are your friend. Your armor can and should be a separate layer from the body sprite, and depending upon what you are doing, it may make sense to have different bits be different layers so you can layer them as you like on the paper doll. If you look at the hover-armor I did, I did that for the jet-backpack.
#4. The naming convention for the layering is a little puzzling. Search will get you the doc on it, but the basics is your sprite-id (as defined in extra-sprites, not the filename, that's irrelevant) needs to follow this pattern:
The prefix, as defined for your armor,
Two underscores
The number that defines where it is in sequence in the layer definition (ie, is it the 1st, 2nd, 3rd, etc, item in the brackets)
Two underscores
The sprite-id as it appears in the layer definition.
I
think the layer definition sequence is 0 indexed. But you'll get an error message if you do it wrong which should point you in the right direction.
#5. Not to shamelessly self-promote again, but check that submod I posted yesterday or so. It has all the stuff you need all bound up in one, fairly small rule file, so you won't have to search through a bunch of giant, disconnected rule files for a reference.
#6. Drop by the matrix. As I'm doing some of this myself at the moment, I'd love to talk shop with you on it.
As a bonus, two teasers of projects I'm working on:
CatbarianThis one is almost done, I just finished the final touches (probably) on the sprite sheet. I just need to finalize the stats.
Nekko Ninja (heresy!?).
Not completely thrilled with the skirt, and still need to do the sprite-sheet.