I copied my following post from another topic that I had posted in, I thought it might be useful here with the other DDS info:
If you use software that does not have DDS capabilities or can not find a plugin, you could try DXTbmp.
You will still have to use your usual software to edit the files but DXTbmp allows you to dismantle DDS files into various graphic formats.
1. Open the DDS file in DXTbmp, export the DDS file as a 24-bit BMP.
2. Open this BMP in your favourite graphics or paint software.
3. Edit the file as desired.
4. Make sure you save it as a 24-bit BMP so that it can be used to make a DDS file in DXTbmp.
5. Open the edited file in DXTbmp and save as a DDS using the LFS file name of the original DDS file.
6. Put the new DDS into the LFS/data/dds folder and Bob's your aunty.
That's all there is to it. But, it is important to note that some DDS files have an alpha channel, you can think of it as a kind of masking layer that obscures or enhances a part of the underlying image. An example of this type of DDS in LFS is the tyre sidewall DDS (LFS/data/dds/LOGOALPHA.dds).
To dismantle and recompile DDS files like this using DXTbmp is a little tricky so follow this method:
1. Open the DDS file in DXTbmp and export the main image as a 24-bit BMP file.
2. Export the alpha channel seperately, also as a 24-bit BMP image.
3. Edit these two images as you desire using your favourite graphics or paint software.
4. Here's the tricky part: when you want to reassemble these two components into a DDS again, using DXTbmp, you have to start from scratch. In other words, you are essentially making a new DDS now. If DXTbmp is running, shut it down now and then relaunch it.
5. In DXTbmp, open the main part of the image that you just edited, it should be a 24-bit BMP file.
6. Import the alpha channel file that you edited, it should also have been saved as a 24-bit BMP file.
7. Save the lot as a new DDS file. Make sure you name it using the default LFS name of the DDS file you originally edited.
8. Put the new DDS into the LFS/data/dds folder and Bob's your aunty.
As always: back up your original files before editing them!
Recap: the trick to compiling DDS files properly using DXTbmp is to build the DDS from scratch
after you have edited the seperate components in your favourite software. This is probably not going to be an issue if you are editing DDS files that don't have an alpha channel. The interior files of the LFS cars don't currently have an alpha channel IIRC, but ones like the tyre sidewalls do
Using DXTbmp allows you to still use your preferred graphics or paint program even if there is no plugin or DDS support available.
As for Corel PSP having DDS support in the future, don't hold your breath. I've been lobbying Corel for almost two years to add DDS support to their products, they've only recently added support for the RAW format, and that was after several years of lobbying by Corel customers.
DXTbmp to the rescue. It's free.