Definitely epoxy putty. You can use knife blades and the ends of old paint brushes for sculpting tools, and try using different materials to impress a texture into the putty if you want. Anything from different sand paper grits to old tee shirts or even cloth bandaids will do, though in 1/35th scale, texture isn't going to be as much of an issue. Work in small sprints, a leg or even a half a leg at a time. For baggy clothes, let the putty set for about 20 minutes before using. It will hold the rolls and shape you give it much better, and will stand up to handling a little better as well, in the event that you get careless with a tool or your fingures while manuvering the piece as you sculpt. The putty needs about two hours to fully cure, though it will be unworkable after about one hour.
As for paint, milage varies from modeler to modeler, but I prefer artist's oils and Humbrol Enamels. As ajlafleche stated in the last post, you're going to just have to eyeball the correct color. I assume you have a color source of some kind. If it was me, I would probably use Prussian blue with a touch of burnt umber maybe and tweek it from there, but that's just a guess without seeing the exact color to match.