When you create a character you set apparence, class, name, log into world, 2way:
1. Character havent the apparence you have set
2. Can't login and still have an error message
Some screens

I've noticed that when I create a character, my appearance is not the same when I log in also.
As for the <verify> error, I had that error before. I created a second account and did not get that error.
It eventually went away on my first account, but two things happened, and I'm not sure which fixed it. Either it was LethalEncounter reseting the login server, or it was a server that I had a character on came back online.
Here is my encounter with it on 0.3 servers.
http://eq2emulator.net/forums/viewtopic.php?t=303

Character creation/visualization issues have been fixed and will be in the next release.