I could have sworn that I had a post somewhere around here talking about decals/sticker paper/etc, with the pros and cons. I can't seem to find it either. The most inexpensive way to print decals is by using regular paper and then using packing tape to apply them. It requires cutting out the decal and placing it on the tape and then when cutting the tape, leaving just enough room for it to attach.
THIS link will send you to a page where many castle themed torso decals can be found.
THIS link will take you to a page that has the downloadable psd and bitmap links so you can begin creating some decals. It is also the first step I took in making decals. The print size on this page once you download them should work perfectly. I know it did for me. My advice is if you are just starting off, is to do a test run in black & white on regular paper. It's the most cost effective way. Colored ink can be expensive and I know some parents would not be happy having their colored ink being used up so quickly. Sticker paper can be used later down the line once you get the hang of it, but I've found the ink can "chip off" and the edges can peel after time if you are not careful. That is why I suggest packing tape on regular paper for novices. It is cheaper for when you make a mistake (and trust me, you will) and the quality is acceptable by a pro (well, at least this pro

). Good Luck.