The
basic "how to rebuild" procedure is covered in
this post and
this post.
The more advanced concepts behind what to do to rebuild a game are really learned best through experience. Browse through
SwapMagicFix.com to see how certain games get rebuilt. Also, I recommend you browse the file lists and IML/IMS file sets that are posted in various forums. Compare these rebuilt versions to versions from the original to see what was done to them.
Most games that need rebuilding simply have "slack space" intentionally put in between files. This slack space is just unused empty space, but in many cases, it causes the TOC size of the backup to be larger than what Swap Magic can boot. When rebuilding this kind of game, you simply remove the slack space by placing the files onto the disc contiguously, much like running a defrag on your PC HDD.
Other games do have dummy files that can be replaced by a smaller file, or removed altogether. Some games will have munge files that must be extracted, downsampled, and relinked. Some games will also have nice patches that do all this for you, as well. For the more difficult stuff, some games will have LBA checks in them, which make moving any files around very difficult.
Because of these differences, most
game-specific questions about rebuilding are handled in that game's respective thread. Hopefully, this has been a good broad explanation, though.