Unlike some other systems, the custom character system doesn't scan all .ini's you have for custom character data. They have to be set up a specific way.
First, create a new directory inside \My Documents\My Games\Unreal Tournament 3\UTGame\Published\CookedPC\CustomChars\. The directory name can be anything you want. Inside this directory, add a new file named UTCustomChar.ini. In this file, any .ini data you add will be merged into the UTCustomChar.ini in the Config directory. The format is the same as Default*.ini files, which means to add entries to an array you need to prefix them with '+'. For example:
Note: The first time you run the game with your new .ini, it will not take effect. You will have to exit and run the game again. This is a bug in the engine that will be fixed in the next patch.
Uninstalling: Since the updated .ini gets written to disk, removing the mod files won't get of the .ini entries. However, if all your custom character mods are set up using this system, you can simply delete the UTCustomChar.ini file in your Config directory and it will get regenerated from the base data and remaining mods.