STEP 1: EDIT AND CUT YOUR IMAGE ACCORDINGLY.
This is what i want to index. As you can see it's cut and has no background. Cutting of unneccessary parts or recoloring that you find necessary to do must always come before indexing. So get all that out of the way, and when you're ready move on to step 2.
STEP 2: APPLYING ZERO COLOR
After you open your image, you should see this.
Next what you need to do is add a new layer, like so:
After you've done that you want to apply your 0 color to the new layer. It doesn't really matter what color it is because it's going to be transparent in mugen, choose something that's distinguishable from the image you're indexing though. In this example i'll be using lime green.
Choose the paint bucket tool after you've choose your color on the tall box on the right hand side, then fill it in on the new layer, and drag it under your original image like so:
STEP 3: ADDING THRESHOLD ALPHA
This is an important step in indexing. If you don't do this you'll notice your image blended in with the 0 color and you won't be able to properly index the sprite.
So click on the harley render in the left hand side box (layers channel) and then apply the threshold alpha like so:
You should now see this:
STEP 4: INDEXING
You should now have 1 layer. Harley on top of a green background. The next step is indexing the image. You will click on Image - Mode - Indexed, like so:
a box will pop up like this, switch it to 256 colors and convert it like so:
Your image is now indexed in 256 colors.
STEP 5: REARRANGING COLOR MAP
Another very important step, this officially sets your green color to 0 and makes it transparent in mugen. Go to color - map - rearrange color map, like so:
Now drag your background color in place of the 0 color, like so:
and hit enter.
Your sprite is now properly indexed.
Fun tip, if you'd like to crop your sprite before it enters fighter factory, you can do so in gimp by clicking Image - Autocrop, like so:
You are now complete, and have properly indexed a sprite and cropped it using gimp. Export as a .pcx as you're good to go!