If you have or ever get a cricut machine they have a great cartridge for paper dolls http://www.cricut.com/res/handbooks/PaperDollDressUp-Handbook.pdf. Sizzex Die Cutter also has templates for paper dolls

References :

perhaps she can help you at this website http://www.freewebs.com/scrapbook16/links.htm

there are some who do this at http://www.deviantart.com/#
creating dolls that look like themselves and friends.

I know a base has to be designed and then you can change skin tones and eyes hair etc…

perhaps someone will come along with more info…

References :
http://www.freewebs.com/scrapbook16/links.htm
http://digital-art.suite101.com/article.cfm/pixel_dolls