I'm assuming this is the one you're talking about.
I don't know if you've ever seen or experienced one of these things, but at some malls and theme parks some folks used to set up airbrush tattoo booths. They had catalogues of stencilled designs that you could choose from and you'd pay up and they'd lay a stencil against your skin and airbrush some sort of body paint using the stencils. I think it may have been alcohol activated, but it has been nearly 8 years since I've even seen these booths. The point is, your design is almost identical to the sorts of stuff they offered, even to the tee with the colour gradient (they simply layered paint colours).
What you need to make an infinitely reusable stencil is buy a thin, stiff sheet of plastic or cardstock paper. You need to be proficient with an x-acto knife, and it can be harrowing work, but you need to draw or trace the tattoo design onto the stencil base and then cut out the parts that the colour is meant to be on. The toughest part will be the lettering. Then it'll be no problem to airbrush or sponge body paint onto you and your buddy, you simply have to secure the reusable stencil using medical or masking tape so it doesn't shift during the application.
I don't know what kind of detail with the burn effect you're looking for, but some folks are pretty talented at using liquid latex to make scar effects, but its often opaque. I've heard of this stuff called rigid collodion
, which is good for making scars that are actually sunken into the skin rather than built on top. You can research liquid latex for burns, but it will likely cover your tattoo. I think if you applied this rigid collodion stuff over the painted tattoo it would appear as though the scar still has the tattoo showing through.