We've had some confusion from some Ouch! players about how the custom face feature works. Ouch! actually uses 3 images for each face, 1 for each supported expression: normal, happy, and "ouch!". When you select a face in the character face screen, you can touch the buttons on the bottom left of the screen to preview the different expressions for that face:
So, when you go to create a custom face from your own images (or the camera), you will be prompted to select 3 images in a row. The menu that pop up each time tells you what expression you should choose the image for. Once you have selected all 3 images, the face can be saved. If you don't have 3 different images, you can just choose the same image multiple times.
Even after you have created a custom face, you can still fine-tune the alignment of the individual images. In the face select screen, select your custom face. Then touch the button on the bottom for the expression you want to adjust. Then just use 1 or 2 fingers on the top part of the screen to drag, rotate, and scale the face image to your liking You can do this individually for each expression on the face. When you are done, select "DONE", or choose another face from the list. You will be prompted if you want to save your changes!