... You needed to set it up a certain way so it read files almost in the same way as Phantom Wings's File Patch Code. But looks like you have your solution now.
Well, use BrawlBox to open char_bust_tex_lz77. Then, look through the MiscData until you find Sonic, then replace those pictures with portraits you want. Save it, then replace the char_bust_tex_lz77 in sc_selchar and common5.
Well for one thing, just because you use a moveset and a texture doesn't mean that the game magically knows to create a new picture for the character; you'll have to create and insert the image into char_bust_tex_lz77 yourself. Just using a sc_selchar or common5 won't be enough.
Maybe it's because you're forcing an extra slot when the CSS you're using cannot support that many characters.
Use PW's CSS Organizer (has a nice GUI) and just change around how the CSS looks like for the no. of characters you have (most likely, you'll have to reorganize the whole thing to make it look like ASF1nk's again.
They seem, on the surface, to be a text editor, but it seems to be able to open a ridiculous amount of file types (though it turns out rather illegible).