In the rw tool "file" menu, select the "Open .tgpcdx texture file".
once you do that, you'll see a whole bunch of stuff in the window, and none of it graphical, but thats ok, thats what we want.. it says your file has loaded successfully.
Once your file has loaded, open the "Graphics Tools" menu and select "Convert .tgpsdx to.dds"
When you do this, a small window will open giving an advisory with regards to the file and will contain the dds format to use as well as the number of mip maps required for the edited file to work after its converted back. Its very important you save your file after editing using the parameters that are given in that window or you can end up with invisible textures, moire patters, or something even more bizzarr.
Next from the Graphics tools menu select "Edit.dds File"
That will open your graphics editor provided you have comfigured RW Tools options to point to it.
You'll also need a .dds pluggin for your graphics editor. I use photoshop and have an nvidia card, so i use the Nvidia pluggins and they work quite well with this program, but i know that pluggins also exist for PSP and other programs.
When you finish editing the texture, save it using the dds format and number of mip maps given in the advisory when you converted the file to dds.
Now go back to RW Tools and select "Convert .dds to .tgpcdx".
Another window will open showing your edited .dds file. double click on the file name or highlight it and select "open". Thiis will convert your edited file back to .tgpcdx and copy it back into your trains folder..
Run RailWorks and enjoy

..
Now, thats the down and dirty way of doing it. If your creating a new livery, and want to keep the original livery, Thres a couple more things that need to be done "Before" editing the texture files, but those are covered in any ( and all ) of the tutorial files i posted above. Railworks file management is about as convoluted as it gets, so to identify which version and livery of the train your running, it uses pointers inside the main .bin file. I personally havent gone that far yet so i can only refer you to the tutorials. for practice though the above method works fairly well.. There ARE some anomolies i can see which i wonder about, such as the fact that the entire livery i painted for the double d has miniature waffle squares all through it, like the grid on a metal grating. You cant see them unless you get rediculessly close, but they're there, and i'm not quite certain what is going wrong, or where..
For practicing I can recommend using any of Dicky Cowes "Family Lines" stuff from BritKits. Lets face it, "Family Lines" is (A.) not Pretty and (B.) not a real railroad, but they are good models to drive ( although the high nose GP-7 is a pain in the ars some times ) and a wonderul way to practice painting without much worry about ruining anything ( the textures are very very simple, especially for the cab view).
Enjoy and have fun

Pam