Current questions and answers regarding the map editor.

The editor really doesn't recognize it. But no one uses the editor for this; instead, they create an integrated mod. You can explore the developers' maps and see how it works; it's quite simple. Clarified: the format isn't just dds; the subtype is tf_dxt1. Personally, I don't use Photoshop for editing dds files (I don't use it at all :P); there's a free editor called paint.net that does all this without any plugins.