I proceed exactly like this:
1- look well the atrwork of the character you want, remember the colors, the main parts (ex: for Shou it's her shawl, the tiger pattern and her crown), the hair, the clothes, the lenght of the dress... all the small detail that make the character unique.
2- search into the great treasure named Phantasmagoria of Flower View and search the sprite(s) that fit the best with what you want. You can use several sprites if it's needed. Espacially, look for the best dress lenght/shape. It's the most important part and the most visible on the sprite.
3- Open your favorite drawing software like photoshop or anything you know and use well (you need one with layer and alpha. And preferably any kind of grid). Then, on the ZUN's sprite select the 1st, 3rd, 5th and 7th frame for the iddle and the four last frames for right and left movement (if you want to make 4 frame animation like me. You can use the entire ZUN's sprite but it's longer and harder to edit).
4- Start with the main body (= the sprite you use for your character as the main base). Erase all that you don't need like ears, fancy hair things, any kind of weapon, etc.
5- Then select all what you need on other sprites (arms, hairs, hat, any special parts of the dress...) and add them on the main sprite (on different layers. One layer for all new element. Don't overlaid them on the same layer or you can have problem later.
6- Now, you have the main shape of your sprite. Change the colors with a tool that can change color or play with different blend of colored layers (you can apply the color only on the surface you need to color (that what I made for Shou dress).
7- Add any missing details, make the things that doesn't already exist (like Mary/Renko hat).
8- Test the animation on a gif (personnaly I make one gif for the 3 poses). If it work well, enjoy the sprite. If not, change the things that cause issues (usually it's only things misplaced and you just need to move them of few pixels).
usefull things:
Mystia have good wings usable for all birds (ok there is almost no birds).
Reisen hair's are pure gold for all characters with long hairs.
Tewi and Prismriver have really usefull dress/body that can be used for a lot of characters.
Dont' hesitate to make things not clear. ZUN's sprites are messy and the less you have small detail, the less you can see flaws.
Some characters are really hard to do with this methode, due to too much particularities.
I hope it can help you ^^