Modding

So... how do I fix this?

You're probably creating the textures incorrectly. I simply replaced all instances of /Textures/Effects/FireSequence/Red/Fire00.xdb#xpointer(/Texture)"/> with /Textures/Effects/FireSequence/Blue/Fire00.xdb#xpointer(/Texture)"/> in idle00, and everything was fine. I tried recompressing and saving without mipmaps, but the defect was completely different, as if it were caused by texture compression.