See #1650 for more info. This would require reimplementing DdsImagePlugin._dxt1 and DdsImagePlugin._dxt5 in C, and adding a dxt3 decoder as well. There is also a DXT1a extension which adds alpha support to DXT1. BLP, Blizzard's image format, uses that.

http://wiki.polycount.com/wiki/DXT some good info there on the various formats.