To make custom townies use Inge's teleporter shrub or cat from Simlogical.

The tree you are talking about is the NPC and Townie Maker. One of the later EPs turned it into a technicolour gun, hence the term "townie gun" being used at times. This is an in-game spawnable object and it auto makes townies based on your face templates - either original Maxis or custom replacements.

Which are you interested in using?

They are the same, or just about. Here is a link to both: http://www.drealm.info/simlogical/sl/Sims2Pages/Sims2_Teleporters.htm

The cat is for Pets and above, though you can still use the shrub as it is compatible with all EPs. Just depends on what you want it to look like. There is also a painting that I forgot about.

To use one of these teleporters, basically make a group of 8 sims and chuck them onto a lot. Buy a teleporter. switch from sim to sim and have each in turn click on the teleporter (cat/shrub/painting) and select the option Make Me A Townie. They will each in turn become uncontrollable. When you've done the last one, save and exit. Rinse and repeat for next group of 8. If you make townie children and teens, they will need to be made in CAS as related to an adult so you will later need to sever family ties using SimPE or you can do that on the lot using the Family Tree option on the InSimenator. Possibly you can also do this using the Sim Blender. I don't use either of those mods so have no idea how to do it. I don't know how familiar you are with SimPE's sim editing functions. Shout out if you want instructions on severing family ties.

Works with students. There is no make a student option, you create them in YACAS then throw into a dorm and choose the "make me a townie" option.

All dormies and townies/downtownies get assigned stats when they generate on a lot for the first time so there is no need to assign jobs and majors. But this only happens once they generate and not before so don't panic if you don't see any in SimPE.