I figured out how to make cloth in TrueSpace 7.5! Just follow this tutorial I made if you have TS7.5, and want to make clothes for your characters.

1.)Make a character with the body separate from the head.

2.) Right mouse click on the body mesh, select the faces of the torso and arms, using the 'select using rectangle' tool.

3.) Click the 'copy' tool, then click the 'separate' tool. Move the copy and the separate torso and arms to the position under the head if they were not there already.

4.) Scale the torso and arms (the shirt) to fit your model, just until it covers the torso and arms of your character.

5.) In the Material Editor, you can now texture the shirt, or UV map it.

You can use the same technique for pants.