Custom ponies are a big part of the My Little Pony community. I'm sure some people were customizing G1 ponies but I feel like the art really exploded with the release of G3 ponies. Of course really baity (bait or poor condition) G1 ponies are still customized, but I feel as though more people are looking at restoring G1 ponies (with the exception of extremely common ponies). I only really attempted two G3 customs and I don't think either of them came out particularly well.
When I got back into the community with G4 I wanted to be more active in the customization world, so I bought a random assortment of hair off of a collector that was selling it for cheap and experimented with my first custom pony. Later I was chatting with a friend from Ohio that also collects My Little Pony and was interested in customizing so we decided to do a swap. I picked one of her favorite ponies and she picked one of mine, we bought g4 ponies and then painted and rehaired them to look like some of our favorite old G1 ponies. We'll exchange them sometime next month when I'm home for christmas.
The pony I made for her is called Seaflower and her G1 counterpart actually has uv activated hair that changes in the sun. I couldn't get UV hair, so this pony just has normal hair. Honestly, I'm torn about Seaflower. She was my first FBR (full body repaint) and I made a lot of mistakes, but I think the end result is terribly cute! Anyway I hope my ohio friend enjoys her and I'll be sad to see her go. But I am working on another custom pony for a holiday swap.
Now to add a few layers of paint before bed and early morning ponies. I need to see if I can get the car to get to Toys R Us (TRU) where they are having a BOGO sale. (I won't buy the playsets at full price but I'll consider it at a discounted rate).