I’m not sure about creating a design but there is the website that has somethng called Knit Pro where you can upload an image from your computer and it will put it on a grid for you. http://www.microrevolt.org/knitPro/index.php
Here’s a free demo of Sweater Wizard, but it’s not completely functional and I don’t think you can add things like intarsia. You could combine it and the previous link to get what you need maybe though.
One thing that I’ve done very successfully is to print out some knitter’s graph paper, and then print the picture I want on top of that. It may take a little adjusting on the edges, but it gives you a solid start.
You can also print the graph paper onto a transparency and lay it on top of a picture.
I found two “universal” sweater patterns, printed them out and they are at home… while I’m at work and unable to see what websites they came from. :sad: