in my experience the toolset works best when run in win xp sp2 compatability mode. there still will be some refresh glitches, but often it is enough to tick a box, like facial hair, on and off in the properties of the npc. also make sure to edit the look of an armor in the armor settings tab.
I also run it in XP SP2 mode.
I'm editing the armor by opening properties (new window) of the armor, and on Armor Set tab.
The graphics refresh is very inconsistent. Example, I can click Show as Female and model changes to a female fine. Uncheck it, and won't return to male sometimes.
Or select a new shoulder piece, boot, or some other piece and it does not change in the Properties window, but close all that out, give an NPC the armor, and it does show up there.
I have found that rebooting the computer always before opening the toolset makes graphics function much better.