Decals are as easy as drawing in black & white and saving it into the right directory. You don't have to worry about the palette anymore. Painting in grayscale means you won't see any color on your decal, nor will you assign a color to the decal; you'll now be able to choose it in the game. If you've made a decal to the old specs, it will still work - this is just an easier way to make them. If you have Paint Shop Pro, here is a tutorial.

1> Create a new file at 64 x 64 with 72 pixels/inch in Grayscale mode. Keep in mind that in grayscale mode, black is transparent. So the simplest way to do this is to paint with white on a black background. But I've spent too many years drawing on white paper to get used to this. So, we're going to paint black on white, then invert it.

2> Use whichever tools you'd like, and be as creative as you can. You can draw with any shade of gray or black. Just keep in mind that black is opaque and white is transparent, so you will clearly see whatever is black.

Notice the blurring around the edges. This will give an effect that my decal is fading into whatever texture is behind it in the game.

3> Invert it by clicking 'Image', then 'Adjust' and choose 'Invert'.

4> Save it as .bmp and copy it to the \Half-Life\logos directory. Run Half-Life and choose your decal in the Multiplayer screen, and also select a color for it.

Note: if you want to change your decal after you've saved it, you'll need to convert it to grayscale before you invert it back to normal. Photoshop saves grayscale .bmp files in Indexed Mode and if you invert it from there, it will just invert the palette.

Here is a screenshot of my decal in Half-Life.