-
In theory, you can add many textures, one for each extra piece of clothes, headband/helmet/hat, or feet/shoes/boots.
The only tricky part is just to blend them so that they overlay each other in the correct way. F.E. multiplying won´t do it, since this creates a mix of the two input textures → bald head and hair texture will become one mix with the color of both of them mixed, instead hair in hair color lying on top if the bald head. Or the headband lies on top of the head and hair, it should not get mixed with the head and hair color. -
Not sure, if i understand this question correct ^.^ Will you combine those sprites into a flipbook to get an animation? Then you would need only one instance for that flipbook (or for all flipbooks , that are created from the same texture and its sprites), and the master material contains all the stuff for merging and blending the extra textures together.
if you want use every sprite as a unique sprite, then you would need one instance per sprite. One master material, and several instances created from it, for deciding, which instance will show which parts and color them in which way.
I tried to create such a material with some character textures from a RPG Char Generator. It´s far from perfect (in fact, its pretty buggy and breaks, as soon as i try to add a chainmail under the chestplate 
), but it shows, that with some smart lerping (smarter than my version ^.^ ), blending and whatnot, it´s possible.
