dds files can be a pain in the ... to say the least. I haven't tried it myself yet, but make a copy of the original dds of course, then convert it to the 'native' format of whatever program you are using and save that. Then do your edits, and save to a different name. Once you have your name the way you like and have done a final save, then convert it to dds. Make yourself a mini-mod with it, and change the file name to the proper name for the mod. Activate your mini-mod and see what happens. Any issues, use the other format of the file that is in your graphics program's 'native' format to do further editing. Don't try to fix the dds version. As to whether you use DXT1, 3, 5, etc for the dds conversion, I don't know, but I will sometimes experiment, and do a straight DXT1 (no transpanrency), and then another with the interpolated transparency (5??), and try them both... There are definitely more-qualified graphics folks who could comment.
