Let's open the character set:
As you can see there are only English characters. If we pretend to translate the game, we have to add all those non-English characters that are missing. In this case I'm going to translate this game into Spanish, so we need to add the following 16 characters: á, é, í, ó, ú, Á, É, Í, Ó, Ú, ¿, ¡, ñ, Ñ, ü and Ü.
If you open the image with Photoshop and zoom-in to the max, you will notice that each character is allocated in a 12 x 12 pixel matrix, so that's the maximum size of a single character. I recommend you to create a grid in Photoshop in order to work more confortably. Edit > Preferences > Guides, Grids & Slices. Gridline every 12 pixels, Subdivisions: 1.
Add each character carefully, always respect the 12 x 12 matrix for each character. Here you have the final result:
Beautiful, huh? As you can see I changed the fonts a litte bit since I don't like serif fonts in games. One last thing: each font has a shadow in order to see the texts when the screen goes lighter, so you will have to add that shadow to the new characters too:
I've changed the shadow color so you can see it, but you must keep the same colors that the original file uses. Be careful when saving this file, you must select 4 BPP which is the original pixel depth, otherwise you will change the file size and that will cause future problems.
Each TIM file has its own CLUT and its own VRAM, so you must keep that information, otherwise that will cause problemas. In this case be careful when saving this file, the proper data is as follows: