I'm not sure what to do to get the custom character to be enabled. I'm playing single player and LAN only, no internet. I don't know if that makes a difference or not. As of right now it won't even highlight when when I scroll over it. Thanks for any help.

Ensure your cam is on, many of the cams are not supported.
Which one are you trying to use?

I don't have a cam set up. I just thought you could click on "custom character" and fix it up the way you want it??

You have to go into outfiting. There you can change armor camo headgear anything you want.