...

You'll need to change one very important setting on the texture. Double click your newly imported emblem (or right click and select properties) and change Address X and Y to 'Clamp'. 

And you're done!

Previewing

If you're still looking at your emblem in the content browser you can save its reference by right clicking it and selecting 'Copy Full Name to Clipboard'. Simply open up a character model, paste (or green arrow if you reselect your emblem in the browser) your emblem into the 'Emblem' texture slot. You can adjust the colours with EmblemColor1 through 3.

Image Added

Tips

Too much detail

While you're certainly able to paint with a 1px brush, very fine detail tends to not look good on emblems. A combination of compression, texture filtering, and mipping (distance based lowering of texture resolution) muddies overly fine detail and creates artifacting. Large, bold details hold up better in game and are more easily identified from a distance.

...