You go into the material editor. Select the square from the OBJECT drop down box... In the box that says TEXTURE MAP put your picture of the shirt.. In the box at the bottom on the right that says TRANSPAENCY MAP you put your black and white image that you made. Up the top are some sliders... You set the TRANSPARENCY MAX to 100% When you go back to the scene the square will look invisible.. That is normal.. When you do the render it will show up.. You could do as TygerCub suggested and just use the square to get the figure posed right then place the shirt over you image once you have it in a 2D program...

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Senior MarketPlace Tester

If anyone sees a mind wandering aimlessly around..... It is mine.  I want it back.