From: Tephra Adularia:
Now for how to do scales, this is an idea that has been done for dresses actually. It involves knitting with spangles and is by far easier to do if you own a knitting machine. If you cut your own scales out of a semi rigid material you can make any scale shape and color you want, however your scales can't get much smaller than about 1/4 inch square *visible area* so it's not of much use on fingers and other relatively thin areas. The scales are only anchored at one point so they will flip up if brushed the wrong way.

For a suit with this technique you'll need to knit the pieces of the pattern and then sew them together for best effect. The scales only run one way so you'll need to work out from the neck, not just down from it, so no seam lays on the top of the shoulder but instead runs from neck to under arm. Sewn carefully the scales will cover the seam, if necessary additional scales can be sewn in by hand to fill in spots along seams.

To make the scaled fabric you'll need to know how to make a stockinette knit fabric (knit one row, purl one row) or get a knitting machine like The Incredible Sweater Machine (which Walmart was getting rid of some time ago). The scales are attached to the 'wrong' side of the stockinette fabric (the purl side) with the smooth (knit) side left next to your skin when finished.

Knit a swatch with the yarn you plan to use for your scale fabric, if hand knitting use a US size 6 needle (sorry, I don't know the metric for that off the top of my head), or a size that will leave you with a fabric that is not too loose but not stiflingly thick, you want it have some holes when you stretch it tight but not when the fabric is relaxed. For yarn a cotton fingering weight is probably best, the knitting itself will add stretch so having a stretchy yarn is not necessary, choose something smooth and comfortable for you to have against your skin. The lighter fingering weight will make the suit cooler than using a worsted weight. For best effect match the yarn color to the scale color or go slightly darker on the yarn.

For scales you'll need some spangles, which are like big sequins with off center holes. You'll need a hole about the size made by a standard paper punch placed close to the edge of the scale. Any semi rigid material will work for this, plastic, cereal box cardboard, thicker leathers, etc. You'll want it to be opaque (or highly prismatic and reflective) though, to hide the knitting under them.

Now take your swatch and pin it out wrong (rough, purl) side up and stretched slightly, like it will be when you wear the suit. Using a bunch of your scales, lay them out with the holes on the ridges of the fabric. The loops in the ridges that look like U's are the ones that will have scales when you knit the fabric. Play around with them until you get a pattern you like laid out in the center of your swatch. With a marker (or nail polish if you have a dark yarn) carefully dot inside the holes of the top row of scales then remove them carefully, dot inside the holes of the next row and continue until you have all the scales off the fabric. Now you need to count the stitches between the dots on each row and average them, you might have something like 2 stitches between each dot. Next count the rows between each row with dots and average that, you might have something like 3 rows. Note down the pattern of the scales, how much is the second row offset from the first? Is the third the same as the first or is it just offset from the second? Is the fourth the same as the second? The first? Offset from the third? You want to find out how many rows make up the pattern.

A typical pattern might look like this:

*---*---*---*---*---*---*---*
-----------------------------
--*---*---*---*---*---*---*--
-----------------------------
*---*---*---*---*---*---*---*

Where the * are the dots for the scales and the - are the loops of the ridges of the fabric. In this case your first row of scales is knitted “scale, 3 plain stitches” across and ends with a scale. Then a plain row is knitted and the third row is “2 stitches, scale, one stitch” across. A final plain row completes the pattern and you start the pattern over again at row one.

Now you can start actually making the fabric. I'm going to try to cover both hand knitting and machine knitting here though it's been years since I hand knit anything. You will be knitting your pieces from the bottom edge up.

Cast on the required number of stitches for your piece and work one row for a seam allowance, then one or two plain rows so you end up ready to work a row on the purlside (ridged) of the fabric. Now you start your scale pattern, for machine knitters take and place a scale on the hooks of your machine for each stitch that needs a scale and push the scale past the latch of the needle now slowly bring your shuttle across to knit the row, be careful not to pop the scales off. Hand knitters place a scale on the point of your working needle, work the stitch as normal, pulling the yarn through the stitch on the stationary needle and through the hole of the scale to make your stitch. Continue knitting in the pattern of your scales making decreases and increases as necessary to shape your fabric to your suit pattern. Always keep at least 2 stitches between your last scale and the edge of the fabric so you can sew the pieces together.

After you have completed all your pieces sew them together. When possible use weaving to join pieces end to end and a ladder stitch to join them side by side since these seaming methods make for invisible (weaving) or barely noticeable (ladder stitch, sometimes) seams with no (or very little) bulk.

If that's not clear enough I can try to explain it better.

Scales can be done using fun foam, though it will not be easy cutting and attaching the individual pieces, as well as being time-consuming.