To set an existing Content Query Web part to use a custom ItemStyle.xsl file for custom styling list entries, we need to update the following property in the Content Query Web Part.webpart file after exporting to the Desktop.
<property name="ItemXslLink" type="string">/Style Library/XSL Style Sheets/ItemStyleCustom.xsl</property>
After uploading back to the page, the web part now allows you to choose custom item templates in the ItemStyleCustom.xsl file you've created.