There's some different ways to go about this.  It's not really possible to explain the more complicated examples in full detail, but here goes nothing.

1) Easiest (2 form, 6 palette type)
In these cases, you really only need to take advantage of the pal.defaults and [palette keymap] portions of the DEF file.  This is sufficient to split the character.

So first, you're going to make two copies of the normal DEF file.  One for each version of the character.  Then just make some edits so that they are something like this:

Spoiler, click to toggle visibilty

Code:

[Info]
name = "Kung Fu Man"
displayname = "Normal Mode" ;Change this
versiondate = 09,30,2009
mugenversion = 1.0
author = "Elecbyte"
pal.defaults = 1,2,3,4,5,6 ;Make sure this has just numbers 1-6

[Files]
cmd     = kfm.cmd
cns     = kfm.cns
st      = kfm.cns
stcommon = common1.cns
sprite  = kfm.sff
anim    = kfm.air
sound   = kfm.snd
ai      = kfm.ai

[Palette Keymap]
x = 1 ;Press button X to select palette 1, etc.
y = 2
z = 3
a = 4
b = 5
c = 6
x2 = 1 ;This gets changed
y2 = 2
z2 = 3
a2 = 4
b2 = 5
c2 = 6

;; The other one

[Info]
name = "Kung Fu Man"
displayname = "EX Mode" ;Change this
versiondate = 09,30,2009
mugenversion = 1.0
author = "Elecbyte"
pal.defaults = 7,8,9,10,11,12 ;Make sure this has just numbers 7-12

[Files]
cmd     = kfm.cmd
cns     = kfm.cns
st      = kfm.cns
stcommon = common1.cns
sprite  = kfm.sff
anim    = kfm.air
sound   = kfm.snd
ai      = kfm.ai

[Palette Keymap]
x = 7 ;These get changed
y = 8
z = 9
a = 10
b = 11
c = 12
x2 = 7
y2 = 8
z2 = 9
a2 = 10
b2 = 11
c2 = 12

Very basic.  Just make sure that neither you or the CPU can pick the wrong palette, and you'll always get the right version.  Problem solved.

2) Complicated (different modes per palette)
You'll need to search through all of the CNS files for "palno" and try to figure out what changing the palette actually does.  If it changes a single variable and nothing else, then bingo!  You can just make edited copies of the file where the variable is set, force the variable to the one you want all the time, and make a copy of the DEF file that uses the edited CNS file instead of the original.  Honestly, it's easier to describe this if there's a particular character in mind.  Sometimes, the palno is actually used as the variable, so a lot of editing needs to be done.

It's refreshing to see that a character request that isn't like 90MB.

So yeah, this is one of those ones that's a bit more complicated.  Luckily, it's not checking for much.  This character has a normal mode, 11P, and 12P.  It barely uses any variables, one CNS file, and has no pre-defined statedef 5900.  BINGO!  I'm gonna show you how to do this the coolest way ever with a config style variable.

Step 1) config.txt
Make a statedef 5900 config.txt (or whatever name) file.  We'll copy, paste, and edit this file later.  Just right now we might as well make the file.

Spoiler, click to toggle visibilty

Code:

[Statedef 5900]
type = S

[State 5900, 1]
type = VarRangeSet
trigger1 = !RoundsExisted
value = 0

[State 5900, 2]
type = VarRangeSet
trigger1 = !RoundsExisted
fvalue = 0

[State 5900, Mode]
type = varset
trigger1 = 1
; 0 = Normal
; 1 = 11P
; 2 = 12P

var(3) = 0

[State 5900, 3]
type = ChangeState
trigger1 = roundno = 1
value = 190

[State 5900, End]
type = ChangeState
trigger1 = 1
value = 0

Step 2) Find and replace
So we established that we're using var(3), and 0 is normal, 1 is 11P, and 2 is 12P.  Just use find and replace (ctrl+H) to change stuff in donald.cns and donald.cmd.
FIND || REPLACE
palno = 11 || var(3) = 1
palno != 11 || var(3) != 1
palno = 12 || var(3) = 2
palno != 12 || var(3) != 2

Once that's done, you can save.

Step 3) DEF files
Ok.  We have to make our DEF file(s) use the config.txt.  This is as easy as adding a single line to the DEF.

Spoiler, click to toggle visibilty

Code:

[Info]
Name         ="Donald"
DisplayName  ="Dark Donald"
VersionDate  =10,10,2008
MugenVersion =04,14,2002
Author       ="kishio and Donalddesu"
Pal.Defaults =1

[Files]
Cmd      =Donald.cmd
Cns      =Donald.cns
St       =Donald.cns
st1 = config.txt ;; This is the new line
StCommon =common1.cns
Sprite   =Donald.sff
Anim     =Donald.air
Sound    =Donald.snd

Pal11 = Donald12.act
Pal12 = Donald11.act
pal1=Donald1.act
pal2=Donald2.act
pal3=Donald3.act
pal4=Donald4.act
pal5=Donald5.act
pal6=Donald6.act
pal7=Donald12.act
pal8=Donald11.act
pal9=Donald12.act
pal10=Donald11.act

[Arcade]
intro.storyboard=
ending.storyboard=

Step 4) Multiple versions.
Now just make two more copies of the DEF file and the config.txt.  Edit the config.txt files with the different config.txt options, and make the new DEF files use the edited configs.

Now all three versions are available and can use any palette!  You might also consider changing the display names and default palettes...stuff like that.  I'll leave that up to you since it's a matter of preference.

Make sure the file that you (hopefully) created for statedef 5900 is actually called config.txt and not config.txt.txt.  Or just tell the DEF file to use whatever name it is.  Also, if you copy and paste from the forum, you should probably remove the tab spaces on the left of the lines.  You can just use replace (ctrl+H) to delete them all at once.

Usually, if the error says that it failed to load a file, it's because the file wasn't found, or Mugen ran out of RAM.  Hopefully, a text file would not cause Mugen to use too much RAM, lol.

Also, lol.  11P might be the cheapest thing I've ever seen.  I can't imagine playing Mugen in a way where a character like this is balanced.