First off, I want to thank R234 for inspiring me to create these videos and make this guide. I credit him in my Part 5 video. Other people I want to thank are Raptorn, Zappy and PalmliX. They are all great advisors to the community and from what I've seen in the discussion group, have provided an answer or guidance to almost EVERY question posted.
Believe it or not, 2 days ago I had no idea on how to edit Layers, the process I used was to create a jpg and try to edit that into the material. This is a MUCH simpler method and uses the actual material VTF files. No Exporting required.
This is a six part series on how to repair materials in the Robotic Boogaloo Hats and Misc Items, the Heavy's ToughGuy Toque and the VooDoo JuJu to fix them from being black or glowing and display there proper colours. The fixes also allow you to apply paint to colour your hats and misc items to suit your personal tastes. For now, I am just posting links to my video tutorials on my YouTube channel. If needed, I'll post step by steps later, but I think you'll find that the videos are pretty straight forward. I don't edit them all, but the process to fix the ones I miss is pretty much the same.
The process I demonstrate here uses GIMP with the VTF plug in to access the layed material files associated with paintable items, repair them, then apply the layers and save them back to the TF folders in SFM. I also demonstrate using Notepad++ to edit the material VMT files and what needs to be changed within them to paint the items using RGB colour values.
As for the image editing program, you can use any editor that allows you to apply a masing layer to a material image. GIMP, Photoshop, and a program called Paint.net
have plugins available so that you can work with the VTF directly, (you don't have to export the material using VTFEdit to work with it). I am not sure if the plugin for Photoshop works with the Photoshop Essentials version or not, I haven't tried it yet, so if someone out there does try it, please leave a comment here on whether it works or not.
The videos here are geared to the novice user. So yes, they may seem long, but that is the way I create my tutorials, so that the novice understand the process and sees it repeated a few times and he can work along with it.