Start by making an image filled with boxes. Each box should be the size of one frame of animation, and there should be enough boxes to fit the whole animation. Last but not least, make sure not to have any extra space around the boxes. For example, here's boxes for a 4-frame animated CO that is 26 pixels wide and 16 pixels tall.
What you would then do is draw one frame of the animation into each of the boxes.
Then fill what's left over of the boxes with black.
For reference, here's what I added for it in World.ini:
[Custom Object 1]
Image=WobblyArms.png
Tile Width=26
Tile Height=16
Init AnimTo=4
Init AnimSpeed=80
And here's how it looks in the game: