Read the readme-file, OI had problems with it first too, but its all in there.
Links to the best sites about Forgotten Realms, AD&D, Neverwinter Nights, Baldur's Gate... find them at:[url="http://forgotten-realms.pagina.nl"]The Official Dutch Forgotten Realms Startpage[/url]
I believe in BG1 you have to create a folder called PORTRAITS. Use windows explorer to open your Baldur's Gate directory. Create a new folder in there called portraits. Then just put any portraits you want to use in that folder.
If you need more detailed instructions let me know.