1) Download Blender 2.57 and 2.49b.
2) Get python 2.6.X
3) Get GIMP and the .dds plugin
4) Open the .dds file for the grunt, darken it
5) Import the .dae file into Blender .257
6) Switch to UV Editing mode, open the edited dds image
7) Save as a .blend file
8) Open in Blender 2.49b, export as COLLADA 1.4
9) Import into ModelEditor, save as entity
10) Make sure all files are there in the entity's root
11) Try it out!
As I said before, exclude the grunt_skin_spec.dds file, because I believe that is what gives you that blue glow
EDIT: This may not work, because I think there's some issue with animations when you open a Blender 2.57 file into 2.49b. Give it a shot tough, because that's how I create my custom props/entities.