Need help creating custom skin

Hey guys I'm having some problems adding a skin to my model. I'm new to modeling/skinning/animating and I am definitely having a hard time finding answers to my problems. I realize that since I'm just staring out I'm going to have some difficulties and not everything is going to be perfect, but I can dream can't I? Gaining more experience with skinning and experimenting through trial and error are probable the best ways for someone like me to learn, but I happen to be a very impatient person. I made my first model ever earlier this week using Milkshape 3D. The modeling wasn't very hard, just time consuming.

I unwrapped the .ms3d model in LithUnwrap 1.3. When I unwrapped the model I selected all groups and did Tools > UV Mapping > Box. When I had everything positioned in a way that I liked I saved the model (.3ds) and uv map (.bmp) and opened the .bmp with photoshop 5.0. I painted the .bmp in a way that I liked and saved it.

I then opened the (3DS/OBJ)->MDX Converter Plugin in W3M Map Utilites and converted the .3ds file to a .mdx. Then I opened the Warcraft 3 Viewer and converted the .bmp to a .blp. I thought I was all done. No Problem. Although finding out how to do all that took me a long time. I opened the World Editor, opened up a map and imported my files. When I restarted the World Editor I was very pleased to see that my model was even there. It looked great! But the skin was totally messed up. Everything was out of place. A skin that I spent a lot of time on looked totally different from how I had painted it.

So I decided to try something different. I opened up my model in Lithunwrap and selected all and did Tools> UV Mapping> Decal, for every individual group of faces. I positioned them in a way that I liked and saved the model and uv map again. I played around in photoshop again and painted everything. This time I opened up the .bmp in Milkshape 3D. I decided to assign the material to the groups individually to ensure that it looks right. I did that, I assigned the materials to the groups and adjusted how they were placed using the Texture Coordinate Editor. It looked great! I was really happy. I couldn't wait to test it out on a map. All that remained was converting the .ms3d to a .3ds to a .mdx and then converting the .bmp to a .blp and I would be done. Or so I thought.

I opened up LithUnwrap, Photoshop, W3M Map Utilities, and Warcraft 3 Viewer and followed the same process. When I imported my files and opened up the World Editor, the skin was the same as before. The materials that I had added in Milkshape weren't there. How do I make those materials be the skin? I've downloaded some models that didn't even have a .blp. How do I do this? What am I doing wrong?

Sorry this is quite long. But I'm getting really frustrated. I think I'm doing pretty well after only a week though. ^_^

Here's a pic of my model for anyone that cares. I really like Blood Elves but I hate the Blood Elf Lieutenants. This model is for a Blood Elf Warrior Unit to replace them. I call it the Elven Executor . I dunno... I think it's cool. ^_^