this is an excerpt of a posting a made on a other forum:
"I installed the latest NVIDIA driver...but to no avail. I converted the PSD file again to DXT1.....but to no avail. As I said in a earlier posting I left the alpha channel out ( hence the 512 KB): a lot of AI models does not support the dynamic shine so a alpha channel is not necessary..........I THOUGHT. I added an alpha channel to see what happens and ......crisp textures appeared :-) Problem solved ! "
Glad its working.
However it doesn`t really make sense. DXT1 doesn`t have an alpha channel as such. It has the ability to make selected pixels transparent. In effect DXT1 with Alpha and DXT1 without alpha are exactly the same except with alpha you can flag transparent pixels.
Maybe it is because of the header. "with alpha" is actually generated with a slightly different header even if no pixels are transparent.