To use the PfRef1 you have to use an alternative aware mapper. bwa mem is doing this for example. 

1. Generate the reference: We generated the PfRef1 here, called PfRef1.V1.fasta. 
1a If you want to compile your own PfRef1, concatenate all the fasta sequences (Pf3D7 version 3.2 and the alternative sequences) into one called <FILE>.fasta. Then generate a file called <FILE>.fasta.alt that have the NAMES of the alternative sequences. 
Next, use bwa index <FILE>.fasta to build the bwa index. 

2. Mapping: Just use bwa mem PfRef1.V1.fasta Reads_1.fastq Reads_2.fastq > output.sam