Below notes taken from:
http://runecasting.blogspot.com/2009/02/i-want-to-make-my-own-textures.html

Firstly, you will need the AGH viewer http://fridlekh.googlepages.com/ or http://istariareference.com/mirror to grab the file you want, mainly for the file name and path structure. Go browse a bit and grab what you want, noting how you got there through the drop downs, this is the exact same as the folder structure.

Go to your resources_override folder in windows explorer (shortcut to bring it up if you have the keyboard with the start button: start + e) and create new folders to match the structure that the file you wanted laid in. For the water mod, its \resources\terrain\ as an example. You will put your file in the end folder, so in this example it is \terrain\.

Go to the normal resources folder and copy player_commands.def. Copy it to resources_override\resources\.

Scroll to the bottom. You will see this:

{
string name = "clearTutorials"
string abbrev = "cleartut"
string usage = "[no parameters]"
string description = "Clears all tutorial history flags"
int numParams = 0
}

It should be sitting above two }s. Make sure you leave the two at the bottom or you can really screw things up! Add the following code:

//purgeTextures
{
string name = "purgeTextures"
string abbrev = "purgeTex"
string usage = "[no parameters]"
string description = "Purges all texture and image resources for immediate reloading."
}
//aghConvert
{
string name = "aghConvert"
string abbrev = "agh"
string usage = ""
string description = "Converts an image to AGH format"
int numParams = 1
int minParams = 0
}

Save the file (The one in the resources_override, don't touch the normal one).

What you have just done is create two commands that are essential for you. /purgeTex forces the game ingame to dump or unload all loaded textures and reload them, so you can see your work without restarting the game. This also will sometimes generate all agh files that have not been generated, so its very useful, just make sure that the agh already existed. /aghConvert will just up and convert your file.

The game is picky about what format though, make sure your files are .tga (Targa) format, in their appropriate override folder location or it wont work.

The process to make a new horizons texture from here is to make it, save it as a tga in the right folder with the name of the texture you are replacing, then load up the game and type /aghConvert filename.tga (no folder path). You can then /purgeTex to see what it looks like, or restart the game if it doesn't work this time (it will next time). As you adjust and resave the tga to get it right, delete the old agh with the game running and /purgeTex to generate and load the new version.

As I said, it isn't so easy... but hopefully this helps. Happy texturing