Okay, create a file called MD2.dat and format it like this..
PLAY PLAY.md2 9.0 0.0
NWNG NWNG.md2 9.0 0.0
In this example, PLAY is the name of the sprite to replace, PLAY.md2 is the MD2 model to use, 9.0 is the size of the model, and 0.0 is the offset of the model. Create an MD2 folder in your SRB2 directory and put the models you want in there, and name them accordingly. The texture accompanying the model(s) need to have the same name and can be either .pcx or .png format. The texture should be perfectly square so it works on all graphics cards. Also, in case you didn't already know, MD2s only work in OpenGL mode.