rootdir = '/path/to/data';
sujdir = fullfile(rootdir,'/subjectXX');
mkdir(rootdir);mkdir(sujdir);mkdir(fullfile(rootdir,'figures','headmodel');
addpath('/path/to/export_fig'); % https://github.com/altmany/export_fig

mrif = '/path/and/filename/to/T1_mri.mgz';
% the file format could be one of many supported by fieldtrip. Native DICOM format works but is a bit slow to load.

% read in the mri
mri=ft_read_mri(mrif);

% flip image so it looks upright
cfg             = [];
cfg.method      = 'flip';
mri_aligned     = ft_volumereslice(cfg,mri);

Note that if you have used freesurfer previously to segment your MRI, you can load the original mri stored in your freesurfer subjects' directory under SubjectName/orig/001.mgz, which will load faster than the DICOMs

% realign with fiducials
cfg             = [];
cfg.method      = 'interactive';
cfg.coordsys    = 'neuromag';
mri_aligned     = ft_volumerealign(cfg, mri_aligned);

% headshape should be stored along with the MEG data
headshapef = '/path/to/MEGdata.fif';

cfg             = [];
cfg.method      = 'headshape';
headshape       = ft_read_headshape(headshapef);
headshape       = ft_convert_units(headshape, 'mm');
cfg.headshape.headshape = headshape;
cfg.coordsys    = 'neuromag';
cfg.headshape.interactive = 'no';
mri_aligned     = ft_volumerealign(cfg, mri_aligned);

cfg             = [];
cfg.output      = {'brain','skull','scalp'};
mri_seg         = ft_volumesegment(cfg, mri_aligned);

cfg             = [];
cfg.method      = 'singleshell';
cfg.tissue      = {'brain','skull','scalp'};
headmodel       = ft_prepare_headmodel(cfg,mri_seg);

Note that only the scalp surface is necessary to create the head model for source localization. It looks much nicer on the upcoming figures with 3 layers, though.

cfg = [];
cfg.grid.warpmni   = 'yes';
cfg.grid.template  = template_grid;
cfg.grid.nonlinear = 'yes';
cfg.grid.unit      = 'mm';
cfg.mri            = mri_aligned;
grid               = ft_prepare_sourcemodel(cfg);

% save the results
save(fullfile(sujdir,'source_head_model.mat'), 'mri', 'mri_aligned','mri_seg','headmodel','grid','headshape');

% make a figure with enough space for 3 panels horizontally
p = get(0,'defaultfigureposition'); p(3) = p(3) * 3;
figure('name',suj,'numbertitle','off','position',p);

% first panel with brain and aligned grid
subplot(131);
hm = headmodel;hm.bnd = hm.bnd(1);% use only the first layer (brain)
ft_plot_vol(hm,'vertexcolor','none','facecolor','skin','edgecolor','none','facealpha',.5);
ft_plot_mesh(grid.pos(grid.inside,:));%
lighting gouraud
material shiny
camlight
view(90,0)
rotate3d on
drawnow
title('brain and source model')

% second panel with head shape points, HPI coils, scalp, skull, and brain.
subplot(132);
ft_plot_vol(headmodel,'vertexcolor','none','facecolor','skin','edgecolor','none','facealpha',.5);
ft_plot_headshape(headshape);
hpi = find(cellfun(@(x)~isempty(x),regexp(headshape.label,'hpi_.*')));
hold on
scatter3(headshape.pos(hpi,1),headshape.pos(hpi,2),headshape.pos(hpi,3),200,'b','.');
text(headshape.pos(hpi,1),headshape.pos(hpi,2),headshape.pos(hpi,3), headshape.label(hpi), 'HorizontalAlignment', 'center', 'VerticalAlignment', 'middle', 'Interpreter', 'tex');
lighting gouraud
material shiny
camlight
view(-150,0)
rotate3d on
drawnow
title('head model and head shape')

% third panel with head and MEG sensors
subplot(133);cla
ft_plot_vol(headmodel,'vertexcolor','none','facecolor','skin','edgecolor','none','facealpha',.5);
lighting gouraud
material shiny
camlight
view(-180,0)
drawnow
% Below is the list of all runs by this subject
allruns = {'run01_tsss.fif','run02_tsss.fif','run03_tsss.fif'};
for i_run = 1:numel(allruns)
    h = ft_read_header(allruns{i_run});
    h.grad = ft_convert_units(h.grad, 'mm');

    ft_plot_sens(h.grad);
end
rotate3d on
drawnow
title('head model and sensors')
drawnow

% save as image and as .fig
export_fig(hfig,fullfile(rootdir,'figures','headmodel',['headmodel_' suj '.png']),'-nocrop','-r300'); % https://github.com/altmany/export_fig
saveas(hfig,fullfile(rootdir,'figures','headmodel',['headmodel_' suj '.fig']))