The glitch has some tricky timing, but with trial and error you'll start to hit it easily (ironically it's harder to time than most MVC3 combos).
To start, you have to have at least one character with an alternate costume. You select that character choosing costume 1, and go ahead and choose an assist (doesn't matter which). Then once you're ready to choose a 2nd character, you move the cursor over the character that you want to unlock an alt costume for, but don't select the character. Once the cursor is over the desired character, you hit the back button, which will bring you back to choosing the assist for your first character. Now, here's the tricky part, you have to hit back (B button on xbox), and then almost immediately hit the left shoulder button. It's like a quarter of a second after hitting B that you have to hit LB, and the timing has to be literally exact, as if hitting a 1 frame link in a combo. If you do it right, your first character will be the second character that you were highlighting, but with the alt costume chosen, whether you bought it or not (or in Mags case, whether it was even released or not, since they're all actually on the disc already). If you're having trouble zeroing in on the timing, a good way to narrow it down is to look at what costume is being selected once you hit back and then LB. If it shows costume 1, you're doing it too fast, and if you get costume 6, you're doing it too slow. So just experiment with that until you get a feel for the timing. You can only do this for the first two characters you choose though, because of the mechanics of it.
Oh, and this works the same way for Heralds costumes as well, though you have to have at least one Herald costume, just like with the alts. You just choose a character that has a herald color first, and do it exactly the same way as above.
