Hmm, if you're on Windows or Linux the image should end up in "(Incarnasoul folder)/Incarnasoul_Data/StreamingAssets/sprites/character/" after extracting or in game download as a large pile of subfolders (e.g. "kitsune", "goblins" etc.). If you're on mac the folder "/(user folder)/Library/Application Support/tl/Incarnasoul/StreamingAssets/sprites/character/" instead.
If the folders are all where expected after extraction, I'm not sure what's up. Are any images appearing at all? If none are it might be some sort of general image loading issue (maybe something like permissions or very long folder names causing trouble).