I'll be honest, I did this craft a while ago, and can't find the link to the original tutorial I was following! The basic steps are like the ones shown here http://www.marthastewart.com/article/no-sew-fabric-pet-portrait
for the fabric portrait, except that instead of doing the layers in fabric, you would do them with fabric paint.
I decided to do a picture of one of my favorite musicians, Dave Matthews.
Note that I had to host the images on my blog site, since I'm a new member. Sorry about that!
Here is a link to the original picture, which I converted to black and white and copied on tracing paper:
Here is a link to step 1, after I'd cut out just the "highlight" ("lowlight"?) portion of the image:
Here is a link to step 2, after I'd laid down and filled in the 2nd cutout:
Here is a link to step 3, once I'd done all three layers:
It wasn't quite perfect, but I thought it was pretty good for a 1st attempt!