The last time I used a construction kit was Morrowind, and I particularly enjoyed photoshopping new face textures to replace NPCs and add player options. I have to say I think I became rather good at it. The hardest part was finding appropriate faces - no hair in the face, looking forward, neutral expression.

Can I do that with Skyrim's CK? I haven't gotten it yet. Something about the way we create characters makes me think it's no longer possible to replace face textures.

If it's no longer possible, how do we go about replacing NPC faces and heads ingame? I find it fun adding celebrities and even family members ingame. In Morrowind for my sister's copy of the game I photoshopped her face and created an entire NPC of her, including some voice recordings I had. I'd like to be able to do the same sorts of things with Skyrim, and because of the huge improvement in graphics it would be even more impressive.

Yes and no! At this time. It will not be like morowind, as far as i know you can retexture/texture faces.
As far as geting a face to resamble a particular person takes a bit of skill/luck/practice with the facegen.
However , (last I knew) there's a bug with npc creation regarding face generation.. Just check the bug list in this section of the forum.

just giving this a little bump for the texture pro's out there to see and respond to your post.

A question for those pro's. In oblivion CK there is a generate face button for the NPC's. Is there a gen. button for Skrym CK NPC's? am I blind?

Yeah to get them to look like someone will be more work than Morrowind, but if we can retexture it's a good first start.

I haven't seen any tutorials on how to do it in Skyrim yet.