It is necesary to have two materials and assign the respective faces to them according to texture they should be using. One material for the head and one for the body. Each using it's own texture.
How it's done:
Add new material to the object in Properties by pressing the light grey button on the right with a white + in it.
Name the old material "Head" and disable the Body texture in the Texture tab.
Name the new material "Body".
Select the "Head" material and press the dark grey button with the black arrow pointing down and choose "Copy Material" and then select the Body material and click this arrow again and press "Paste Mateiral".
Then go into edit mode, select one face which should be using the body texture and press Shift+G and choose "Image". This selects all faces that have the same texture mapped.
Now while having the faces selected click on the Body material and press the "Assign" button to assign selected faces to the material.
Then go into the Texture tab and uncheck the Head texture.
It should work now!
One tip: always name your materials, naming objects is also good, but materials are more important because they get reused often.