First clean the peghead with naphtha to remove any contamination and apply the decal. Most decals are of the water-soluble type, and after soaking, will easily transfer from the carrier paper to the headstock. When in place, smooth the decal with a damp finger to flatten and remove excess water from under the film. When dry, the clear coating can begin.
The decal will crinkle and lift if too heavy of an application of lacquer is made without first protecting the decal. Light misting coats of lacquer will offer this protection as well as soften the old finish and prevent lifting.
Here is an application schedule that will give a good clear coat without damaging the decal:
After applying the decal and letting it dry completely, spray a misting coat of clear lacquer over the decal. Let this coat dry about an hour. Then spray another misting coat and let this coat dry an hour. Spray on one more mist coat and let the lacquer dry overnight. These three misting coats will soften the surrounding finish to prevent shocking and allow the new coats to better bond. They also will act as a barrier coat for the next, somewhat wetter, coats.
After drying overnight, spray with a medium coat of lacquer. If nothing moves, you should be ok. After an hour, spray one more medium wet coat and let dry again over night.
The next day, spray two to three wet coats with each coat separated by an hour's drying time.
When dry (about three days) wet sand with a block in steps of #600 to #1500 and polish.
Again, the underlying reasoning for the step approach is the tendency of the unprotected decal carrier to crinkle if too heavy of a coat of lacquer is applied. The light coats will give the protection needed to prevent crinkling.