I'm not really familiar with SH IV modding old dog but I noticed a couple of things here.
I don't know why you would want an alpha channel or mip maps with this.
Alpha channels are for applying textures with transparency like wires or vegetation.
Mip maps creates a bunch of smaller sized textures for the game engine to automatically replace at longer distances with lower resolution textures to save on memory.
Compare the properties of the image you are trying to replace.
Also you might try this utility. I've had some success with it modding dds files for civ iv.
http://fly.to/mwgfx/
Navigate to the lower center page and click on the icon that is named DXT/bmp.
It is a bmp to dxt file convertor and supports external programs such as photoshop.
cheers,
Oso