For art programs try GIMP( www.gimp.org), it is very good free alternative to Photoshop. Alternatively you also can try Paint.Net( http://www.getpaint.net/), I heard it is bit easier than GIMP. Or if you do not want messing with installations try SumoPaint( http://www.sumopaint.com), it will run in your browser, so you should not need any additional software, just connection on internet, and it gives good functionality. As for MS Paint I heard only bad stuff.

Fan characters come from not only a good art program, but a creative mindset.
I personally prefer Photoshop CS2 and above, which can be demoed here -> http://www.click-now.net/download/Adobe_Photoshop_CS2.htm
Also, you say you've searched on Google?
That can be helpful, but remember that some artists get upset when others create characters with similar appearances.
The best thing to do is practice (maybe with a tablet), think about your designs, and be original.
Good luck. (:

Always welcome. Glad I could help. :]

Oh! Okay, I know what to do! Thanks!!

So, basically, you're searching for a good art program? There are many good free ones out there. The most popular art program out there that anyone would suggest to you is GIMP. It's perfectly free, and virus free as well. There are also others such as Photofiltre. I personally use GIMP, PhotoFiltre, and Photoshop.
To make characters, you basically just need to create a name and a design, as well as background information about the character. (history, parents, mate, ect.) This will be needed for the character's page on the site. You will also need artwork and images.
To make artwork you just, well, make art. It's simple. For images, you can either render or color lineart. To get information on how to render, go here: http://www.animationsource.org/board/viewtopic.php?f=13&t=25070
There are also many other ways to render, but that's one of them. The program she uses is Microsoft Paint, which is installed on your computer already. It's on everyone's computer.
If you would like more help, pm me or comment here. You'll most likely get a reply faster by pm, though. ;] I'll also check back here to this question from time to time.