Hi Gilligan,
To swap out a graphic just double click on the "thumbnail" for the layer that says Change Graphic Here (it is the 2nd layer from the top).
This will open the Smart Object where you can remove the current graphic and paste in your graphic.
You'll then save that Smart Object file and then close it and when you get back to the T-Shirt Template itll swap out the old graphic for yours automatically.
Any problems let me know.
Ok... I never got around to playing with this till just now.
What is the proper way to replace the graphic in this template?