Re: Programs for spriting/editing
Lizard is right in that some of the newer versions of MSPaint can screw with the specialized palleting system in Cortex Command (limited to 256 colors).
I'm not sure about Window 7 or 8's compatibility, but I attached the Windows XP version of MSPaint to facilitate testing things out.
It's best to copy an existing file and edit it to create a new sprite.
I never had to use anything more advanced to MSPaint in any of my mods, but you'll have to take that for what it's worth