This just about covers your question, it's a copy of the instructions I posted over on the SIMposium.
I will bookmark this thread so if you have any questions I will try to help.
How to edit the sims 3 uploaded pictures.
I spent several sleepless nights trying to find a program that would give me access to the PNG files stored inside a lot package. Just when I gave up I came accross an actual sims 3 program in development Postal - A Lepid Llama Package Editor made by Echo, so all credit should go to echo for making this program, it can found here:-
http://www.simlogical.com/Sims3ToolsForum/index.php?topic=85.0
You can download the Package Editor here:-
http://sourceforge.net/project/platformdownload.php?group_id=264651
You will need ensure that Java 1.6 or later is correctly installed Note: At the moment, this is only 100% supported on 32-bit Windows, because that's what I'm running. That's XP and most versions of Vista. It should 98% work on 64-bit Windows, although I've had reports of the 3d preview not working correctly for GEOMs. A Mac version is coming soon.
Ok now we have the tools to do this, next of course you need a lot, so enter the game and save your lot to the library, this will place a copy of the package in the following location
C:\Documents and Settings\YOUR NAME\My Documents\Electronic Arts\The Sims 3\Library
This will be a good time to actual edit a screenshot that you would like to be your uploaded picture, the picture need to be 512 by 512 Example
http://i10.photobucket.com/albums/a103/Tamlo31/S3_d84e7fc7_00000009_89c300286b5af5.png
It's a good time to exit the game and open Lepid Llama Package Editor, click File and open then goto your library found here C:\Documents and Settings\YOUR NAME\My Documents\Electronic Arts\The Sims 3\Library and open the most recent file in this document you should be able to scroll down and find the PNG files, the file your looking for is PNG Icon house large(long name) in the group subsection it should say 0x00000000 this is the main uploaded picture, you might see more png files that say 0x00000001 or 0x00000002 the other pictures are the picture that you will see if you view the picture by clicking on the main uploaded picture after upload you can edit them, but for now just leave them alone.
You don't actual need to extract any files your going to replace the PNG Icon house large with a group instant of 0x0000000 so double click on that file to see a new menu click on the Inport and find your file, then click commit button, now double click again on PNG Icon house large with a group instant of 0x0000000 to check it worked and then click file and save as, this will save your edited lot to the library at C:\Documents and Settings\YOUR NAME\My Documents\Electronic Arts\The Sims 3\Library
You can close Lepid Llama Package Editor and navigate to C:\Documents and Settings\YOUR NAME\My Documents\Electronic Arts\The Sims 3\Library
Your looking for a file that looks like this ebf_0x89c300288413d590.packag_ you should rename this package so it overides the original package, you can make a backup of the orginal package first, so your new file will look something like this ebf_0x89c301286c951870.package.
Now enter the game you should see the lot in the library inside the game, just upload and share, I would actual do a test upload first, remember you can't upload duplicate names to the exchange so if your lot was called SIMposium delight, when you upload, call the lot SIMposium delight test.
That just about covers the basics, rest of this tuturial is about more advanced stuff.
UPLOAD SIZE (not 100% of actual upload size, since posting the tutorial the I've manage to upload a lot larger than 4200kb, so this part might be a little off)
Due to extensive testing I found that uploading lot that are bigger than 4200kb seem to fail to upload, this might be a upload size limit, well at least I've failed to upload anything bigger than that size, the average size a lot is about 500kb the rest of the upload is made up of the PNG images that you upload with the lot a user made PNG will be about 400-500kb each some might be more if you add animation to the picture or extensive editing, you can view my sims 2 page for two examples animated uploaded picture
http://thesims2.ea.com/exchange/lot_detail.php?asset_id=734754&asset_type=lot&user_id=1391924
http://thesims2.ea.com/exchange/lot_detail.php?asset_id=743690&asset_type=lot&user_id=1391924
So before you go crazy and and start editing all them uploaded pictures to showcase your lot and then wonder why it did'nt upload, you try to keep the total size below 4000kb otherwise the lot will fail to upload.
If you look at this lot that I uploaded http://www.thesims3.com/assetDetail.html?assetId=173805
click on the main picture and scoll throu to pictures nine and ten, what do see? Nothing, by uploading a nothing picture you reduce the size of a upload, a nothing picture as got the size of 4.74kb, this will give you more space to play about with to upload better pictures.
To make a nothing pic just make a blank 512 by 512 png file in a paint package and the add that to PNG Icon house large with a group instant of anything other than 0x00000000.
SMALL PNG PICTURES
Inside package editor you might notice to two png file one that say PNG icon medium and the other says png icon small, yes you can edit them if you think it's worth the time, thou I recomend you do not use any animation on them files it will turn them black ingame, they are the files that are used inside the game to showcase your lot http://i10.photobucket.com/albums/a103/Tamlo31/editedpic.jpg
Notice the icon in the library, you should also be a aware when you download a lot from the exchange the only png files that get downloaded with the lot are them files, so when you edit them files thats what people will see in there game, if you don't edit them, they will get the old picture.
The size are 128 by 128 for the small and 256 by 256 for the medium, just make PNG file of the size and replace them files with the package editor
Animation
I've not made any animated uploads for sims 3 yet, I was saving that for a rainy day, but it should be possible to upload animation onto your pictures, but will greatly increase the size of the upload, remember 4000kb limit, but with little a manipulation you can probable do just that, example you could make a png slide show, or flashing lights, or glitter background. to do this will probable need to replace most of the other pictures with the upload, with blank pics. For people who are like me, who do have a degree in computer artwork I recomend that you try to use a few of the free sites that deal with picture manipulation:-
http://www.lunapic.com/editor/
http://www.online-image-editor.com/
Family Households
Yes this can done, you can view the upload here http://www.thesims3.com/assetDetail.html?assetId=132495
This is the hardest thing to edit and to be honest I've no idea how it works, I can only give you a small guide.
First up, make your sim, with me I wanted to upload 1 sim with a nice picture, but for reason beyond me the game fails to generate 512 by 512 png file, the file needed to change the uploaded picture, so I had 1 sim in the library, currently not sure how or when the game generates the picture needed.
I played the game for a few minutes and added two more members to the sim household, exited the game checked the file using the package editor and the 512 by 512 file had generated so I uploaded.
So to sum up I'm very unclear on how that works, feel free to experiment with this, you might have better joy than me.
OTHER UPLOADS
For other uploads like hair, cars, objects and anything else people upload to the exchange, I'm not sure where the PNG files might be, possible stored in the Cache and generated into a package just prior to upload, if I find anything I will update this tutorial.