yes.
BUT, the get hits for the character would have to be the same for custom states as MUGEN's Custom state system uses specific get hits when another character is grabbed or something, and there is no way to force it to use other sprites.
so for example your character is Rryu and pal 4 makes him use akuma sprites, if ryu in "Akuma mode" was grabed by the opponent, he would transform from akuma back to ryu, just for grab, and as soon as it was over, would change back to akuma.
hope that helps!