Well, I would have lost that bet. I converted it using DXTBmp and instead of a big black box, I got a big speckled black box(mostly speckled, very little black). I tried opening the DXT 444-4 16-bit type file in Photoshop and I get an error message...
"Could not complete your request because of a problem with the file format module interface."
I have the DDS plugin installed for Photoshop and I have used it to convert some SH3 mods that were in .tga format into DDS DXT5 format for SH4, see here...
RetroNavMapTools - Jiims NavMapTools - Aces Colored Menu Bar (Combined)
So I know Photoshop normally works with the DDS plugin. If I'd have had the original .tga file to convert from I 'think' it would have worked. Photoshop with the plugin is choking on this DXT 444-4 16-bit type file tho, that's for sure.
EDIT - I have another idea. If it works out I'll be back!