Just curious what everyone is using in this sort of thing, personally I use MSpaint for a lot of the work, Currently have both the windows 8 and the XP versions loaded, also known to use Sumopaint.com for ease of coloring, and the dreammaker built in sprite editor. all of these together are what I have used to make a number of things so far, A few sets of kitsune tails, the spidertaur body, and a custom labcoat for my main.
I lack the knowledge of how everything works on the coding end of things, but I can make the spriting part of things work pretty well with what I have.
If anyone would like the old XP version of paint I can stick it in my dropbox and post a link, as for the rest, you should have easy access.
The more recent paint programs I find to be kinda a pain in the ass for spriting, but the old one seems fine by me.
Sumopaint, doesn't work well for drawing sprites, but is amazing for color manipulation once you figure it out, (very similar to older photoshop)
the Dream maker, really, is not the greatest thing, but, it does make transparency stuff fairly easy, and you need it to extract the images from DMI files as far as I am aware. I wouldn't recommend using it for the entire project on any job though.