Well, not to discourage you or anything, but here is a http://thenexusforums.com/index.php?showtopic=202645&st=0&gopid=1776925entry1776925 to get you started - it states you need a paid version of Facegen ($300) and some other programs to do it.
You can use GIMP which is free as opposed to Photoshop. I've been using GIMP and it's a pretty good program, with a bit of frustration for a beginning user, perhaps.
I'm not sure of a way around the Facegen paid version thing unless you know someone who has it who is willing to convert the facegen texture to a format you can use (DDS) in Oblivion's CS.
You will still need to create a normal map for the texture, and set your new race to use it and the facegen face shape you created. This is where Wyre Bash comes in b/c you need that to import the Facegen face for NPC use. It starts to get hairy for me from here b/c some people prefer using the Oblivion heads (using an exporter) and actually modifying the oblivion head meshes with a program like NIFskope to make new races. But I guess as long as your race is a human one, you can just duplicate the closest existing race to yours and apply your facegen face to it using the Wyre Bash face import feature.
I have never done this for NPCs though, so maybe someone wiser in these ways can help. I am happy with importing a face to the PC for now, which is a little simpler.
Hopefully that tutorial can help you for now. If you need further help, I might be able to later. Right now I barely have clarity of thought to type anything without being interrupted every five minutes. Guess I gotta spend some Dad time now.