Is is possible to change the NPC portraits to customized portraits?

Yes it is - save the portraits you wish to change and shove an N at the beginning - eg a Minsc portrait would become NMinscL and NMinscS - save them into the override folder.

If you do a search on "portraits", you'll find previous posts with all the info on sizes, etc.

I believe its...

Small: 38 pixels wide, 60 pixels high, .528 inches wide, .833 inches high, 72 res. Name for portrait has to have an "S" at the end.

Large: 110 pixels wide, 170 pixels high, 1.528 inches wide, 2.361 inches high, 72 res. Name for portrait has to have an "L" at the end.

Sorceror's place also has a few portrait packs available for download.