This is the part I am missing:
"Just pick a surface of the prop you want to use and apply the image to the face you want it on. Scaling is done afterwards."
I applied my image as a Texture (Diffuse). I couldn't find anywhere else to apply the image to the face.
With the object selected, "Launch" your Photo Editor and then place the image there, based on what the UV layout is or Face is you want. Save it and iClone will update it for you automatically.
If picking faces is too difficult, try a "Plane" to apply your image to, and place it inside a 3D Block "Container" (Many shapes to choose from to create a Frame Box).
You can also drag an image in directly to the item or Right-Click drag from your system folder to the View Screen in iClone, and choose "Plane" (among others) as your type to apply it to.
Most of this is covered in the online help (F1) when inside iClone, or this http://www.reallusion.com/iclone/help/iclone5/Pro/15_Multiple_Channel_Texture_Mapping/Multi_texture_editing.htm
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