A much more comprehensive DIY action figure 'how-to' is located here at instructables.com
The action figure construction process is more simple than it seems. I sculpt stuff with polymer clay, cook it, and string it together with elastic. Done!
MATERIAL: Fimo and Sculpey are used. Both are different brands of the same polymer clay that fires in any standard oven at 265 degrees Farenheit for 30 minutes. Cooked in a conventional oven, the clay comes in all colors. These colors are then hand-mixed, NOT PAINTED, to achieve almost all of the figures hues. Translucent polymer clay is mixed with skin tones for a depth of skin texture.
INTERNAL ARCHITECTURE: Styrofoam is hand-carved to fill large internal volumes like the insides of large heads, legs, and most often abdomens. Steel wire is often used as a sets of bones to give larger, often skinnier, pieces more strength. The multiple, posable body part pieces are cooked separately, unattached to each other, and are hollowed with an internal shaft either before cooking, or drilled after cooking.
FINISHING: These pieces are sanded smooth after cooking, and any minor details are hand-painted in acrylic. The pieces are then laid on a bed of nails, so they can be sprayed from all angles with matte clear spray paint. Sometimes a simple oil, polish, or rubbing compound is used for an even more matte finish.
ASSEMBLY: I string the body part pieces together exactly like beads on a necklace. Since the body part pieces are engineered at their joints somewhat like balls and sockets, they slide against each other to hold poses once the elastic pulls them tight together. The elastic cord is glued into the extremeties (head, hands, waist, and feet), and strung through the body parts. Sometimes a soft wire like copper is coupled with the elastic, through the internal hollow cores, to give the figure more stiffness and balancing strength.
Click on the images below for detailed descriptions.