sorry no idea on the skin - I'm not sure you can view texture properly in gmax if that is what you are using now? (at least I couldn't work out how to make it do it either)

As far as the lod's are concerned, I think that lod1 is the 'large resolution' version, so logically you'd load that one and make changes to that. You can run game using only lod1 models, just replace the references to the other ones in the DMB file. If you wanted to re-make the smaller ones you need to search for 'making low-poly models' I think, and re-make them from your new lod1 so it ties up.

You'll have guessed by now I'm not a modeller so hopefully someone else will help....