its probably the 64 bit thing. I had the same problem. The dds plugin only works with the 32 bit version so make sure it installs to that version.
So on my 64 bit win 7 that is the programs(x86)/adobe/photoshopCS4 not the programs directory. Then fire up the photoshop 32 bit version and then open the file you want from in there. If you double click it then it will default to the 64 bit version and wont work with your dds plugin.
Took me half a day to figure that out! what a doofus!
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