Not tested, just seen in brawlbox. The stage won't work properly, the texture has to be 1024x1024, or 512x512.... But not 1026x708.
Just make a quick resize. The shape comes with the model, not with the texture, so when it's applied to a rectangular model, it will be rectangular. Indeed, it will look the same in brawlbox, but it will be working fine in brawl.
Also, take a look to this tutorial
http://forums.kc-mm.com/index.php?topic=9329.0
When you understand it, you should make the main texture to be not palleted (importing it as CMPR or something) and make the model not to look for a pallete. This will increase the number of colors you can use and it will look better.
Also, if in materials1 you make AsfSoldier.0's unknown8 and unknown9 values to be 1, the texture will be smoother, and this usually looks better too.