In reply to B.j. Tan's post regarding character creation; If you want to create an avatar of a character in Terraria, simply use a program like GameTools, particularly the GXView app withing that software package, and open the XNB files stored in the Terraria images folder. If you have purchased and downloaded Terraria from Steam, your path will be: C:/Program Files (x86)/Steam/steamapps/common/Terraria/Content/Images. (assuming you have everything in their default locations. Either way, the path will be /Terraria/Content/Images in some manner.
Once you get to opening those XNBs, just port them on over to photoshop or something of the like and start get creative! I myself am part way through creating a flash-based character designer for Terraria using pretty well this method. Proof positive that at least it works :) Have fun and I'll keep you all updated on my progress as it happens!
Jai (Terraria/Minecraft player-tag: TurboToe)