Hi, for those of you who have either photoshop or paint shop pro, you can edit and save in dds format, but you need the Nvidia plug-in:
DDS plugin
Also heres a dds thumbnail viewer, so windows explorer can see the dds files:
DDS Thumbnail viewer
The game uses dds image files (its a more compact image with alpha channels) anyway, I figure many of you knew this, but posted the links in case you didnt.
EDIT: the thumb viewer above does not work with x64 systems, however this one does:
mysticthumbs however it is not a free program (30 day trail) if somone knows of a free one, let me know..