How does the progress of applying a custom image to a production line of entities you wish to produce?

Missing a word in your question, but...
- upload your faction custom (NEW, Owner = Faction DC)
- when adding the queueitem, choose the appropriate image.

Not to highjack this thread but if you produce a batch with a custom, uncrate it and then re-crate them, do they lose the custom?

Yep

Calab, as lexor stated, yes. This has to do with the nature of crates. Crates don't store the actual items. Indeed, a crate is nothing more than an item that has a quantity and a reference to what item type it contains. This leads to crated entities losing their customs. Those items actually cease to exist and are recreated once removed from their crate. The reason production entities can have customs while in crates is because the crate itself stores a reference to the custom that needs to be applied to all of the entities inside. It'd be nice if crates would maintain the same custom if all entities package into the crates had the same custom, but unfortunately that'd probably be extremely inefficient and also would still lead to customs disappearing when you crated entities with different customs.

Thank you Kay,
I already had a idea to how it works, but needed a reminder.
And what word was missing?

Unfortunate, it is true that customs will be reset once you repack them after unpacking. So, it is important to remind your members not to repack custom items.

"work" at the end of your sentence.
Oh, and replace "progress" with "process".

Thank you