Yeah I'd be happy to explain.
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I used two things
If you aren't familiar with his tool, here's a quick explanation:
Extracting with this tool takes the 'res' folder's files and puts their extracted versions into an 'out' folder.
Encoding does the opposite - takes the 'out' folder's files and puts their encoded versions into the 'res' folder.
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But more specifically, here's exactly the steps I took....
With barracuda's help I located the Merchant Robe-related files. Here's a list:
- res\paginae\craft\merchantrobe.res used as an icon when selecting merchant robe from the crafting menu
- res\gfx\borka\cloak-merchant\ this folder includes all of the sprites used while wearing the item
- res\gfx\invobjs\cloak-merchant.res what you see when the item is in your inventory or a container
- res\gfx\invobjs\small\cloak-merchant.res used only in two places that I know of: the crafting window and the slots on the sides of the equip window
- res\gfx\terobjs\items\cloak-merchant.res what you see when you drop the item
- res\gfx\hud\equip\female\cloak-merchant.res for the portraits and equip windows of female players
- res\gfx\hud\equip\male\cloak-merchant.res for the portraits and equip windows of male players
I took only those files and put them in a new temporary 'res' folder. I kept the same folder structure inside.
(there's no need for you to do the above yourself - you can just use what you downloaded from the OP, renaming 'Phaes Blue Merchant Robe' to 'res')

I put theTrav's tool into the same directory as the temporary 'res' folder and used Extract. The tool created the 'out' folder.

I went inside the 'out' folder and opened every .png file in GIMP. There were over 90 images I think.
Colors->Colorize...
It helped to zoom in while I tried out different colors.
I played around with the sliders until I was happy with what I saw.

Once satisfied, I clicked the " + " to save a preset.

I colorized each image by selecting the preset I just created.

After saving all those images, all that's left is to use theTrav's tool to encode.

Then it's ready to be dumped into anyone's REAL res folder.