[MDL ED] Trying to learn how to edit a model

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And what about the billboards? you said you can attach them but I messed with the editor and didnt see how.
EDIT: I also tried renaming the .dds file without canging the .dds extension but it would no longer show up if i searched for it in the model editor. It had to be named servant_grunt.dds to show up. Do I have to change all of them to the new monsters name? or is there something else I have to do that I'm missing?

Select the bone you want to attach a billboard to. On the right you'll then see an Attachments tab. Pick Bi for billboards, click attach, and click on the billboards you want attached to the bone.

The DAE file which makes up the grunt references its own textures. So long as it is pointing to the original texture, doing anything to your texture is futile. Note, again, the file names of everything (DAE, ENT, DDS, MAT, etc) must not be the same as the originals for custom story files.