Agreed. No need to bake any color information from Zbrush. Just export with your polypaint enabled and make the selections in Xnormal that Bartalon noted above. Easy-peasy :)
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Other ways to do it are: path deform and enabling the spline as geo. Both have rotation settings built in. Extrude along path is the most limited method for your purpose.
What you're seeing is compression artifacts, all images on compressed on export to reduce load times. To enable the highest quality compression, try the unreasonable texture quality setting.
To add to what Ausonian said, before you reset the XForm enable Backface Culling in the Object Properties. This way you'll be able to spot inverted normals before export.
If you're on Max, simply add a vertex paint modifier and start painting. But for it to work in game, the material you are using needs to have "vertex colors" enable in the shader params.
uninstall java. that shit is nothing more then a security risk. also blocking flash is not bad idea. you can manually enable it if you want to watch a video that requires it.
In the upper left hand corner under paint there's an "X" icon for the color swatches. Right click on it and the "X" should go away and you'll have re-enabled color.
yeah i just tried that. i love this plugin, but there seems to be a couple of hickups. like it seems to crash quite often if i try to enable shadows with 3.0 shaders.