I'm still not sure why my friends DXT Bmp does the conversion...Maybe a fluke?...I dont' know...
Well, it sure doesn't work for me, either! When I first started experimenting with FSX during the early beta process, I nearly went NUTS before discovering that the DDS/DXTn conversions from DXTBMP were "not quite right" and that was why I had so much trouble with "exploded aircraft parts..." :o