Tamiya or Vallejo acrylics can't be beat. I especially like Tamiya. It thins and cleans with Isopropyl Alcohol. Vallejo cleans with water and dried it cleans with acetone. A particularly good flesh tone for caucasian folks is their Shadow Flesh. Lighten it with white for highlight areas and use straight for shadow areas. It makes a great base for rust too. DO NOT MIX VALLEJO AND TAMIYA. The alcohol causes Vallejo to clump. For air brushing, again, Tamiya works great with ISO, but use Vallejo or Testor's universal acrylic thinner for Vallejo airbrushing.
You can really go nuts painting figures. It all depends on their ultimate usage and placement on the layout. If they're more than a couple of feet away, don't worry about painting pupils in their eyes, etc.
I use craft paints, but only on non-plastic porous surfaces. Its adhesion on plastic is sub-par. Once you get used to Tamiya, you won't want to use anything else.