Editing the files is against the TOS. People seem to have the attitude "They're files on my computer so I can change them if I want. Who cares if my level 13 gear looks epic or my mount looks like a dragon. I want my guns to sound like bows...". This is not the right way to look at though. Take a look at section 2-D of the End User Licence agreement (in the section of forbidden activites 'Additional License Limitations'):

D. modify or cause to be modified any files that are a part of the Game Client or the Service in any way not expressly authorized by Blizzard;

http://www.worldofwarcraft.com/legal/termsofuse.html

I know I've seen websites where people make their own customer skins and whatnot, but they always mention that doing so is against the TOS and warn others that they can run into issues with Blizzard over this.