Okay this a more than likely a common problem right?
Well I am having issues with it.
So I do everything right or so I think.
1. I copy the rep folder from the assets folder in BF2 mod tools and paste it in data_ABC sides folder and delete the tur folder that is there.
So basically I took this C:\BF2_ModTools\assets\sides\rep and put it here C:\BF2_ModTools\data_TST\Sides
2. I find the TGA that I wish to edit, in this case rep_inf_ep3trooper, I edit the skin and save with RLE compression unchecked. (As a side note I test in SWBFViewer0.03 - to see if the skins work, I found that if rle compression is on then it won't work here.)
3.I go to data_ABC BUILD folder and munge the map.
4. When I run the game the unit skins remain as they were.

So I am pretty sure that I did everything right.
The only thing that I could think of that could interfere with this that I have Version 1.3 pack installed. I had conversion packs installed but all have been removed. Still the modified skins remain and I can't get rid of them.

The big question is: Do I need to restore the skins to the stock skins to insert my custom skins in game?

You need to call for the custom republic side in your lua. ABCc_con.lua. You need to find the line that says ReadDataFile("SIDE\\rep.lvl" and change it to this ReadDataFile("dc:SIDE\\rep.lvl",

You also need to copy the common side as well, it will be in the same folder the republic side was in, copy it to your side folder, munge with rep side and the common box checked, you should be good to go!

Thank you very much Nate!
The skins are now working and now my work can continue.

No problem.