i wish fs supported 88VU or 88AL formats for normal maps. be a lot better than wasting a bunch of 8 bit channels. video cards have such ridiculously large amounts of memory now. as games started using dxt1 and 5 en masse i noticed a lot of washed out color. when it comes right down to it dxt compression is just an upsampled 565 format. while i have no problem using dxt1 for a diffuse texture, the development of dxt5_nm as a texture format was more of a cheap hack of a format than an acceptable solution (i blame john carmack, lol). seems since that format was established texture memory on the average video card has doubled.
im also looking at
this format, supposidly its the same size as dxt5, but stores the "colors" (and by that i mean uv data) as 8 bit rather than is a 6 and 8 bit respectively (dxt5_nm). essentially all it does is compress both chanels in the same way dxt5 compresses its alpha.
another thing you might want to try, is to copy the green channel to red and blue, or make red and blue 50% grey instead of black. it might remove thr artifacts while keeping the benifits of a compressed texture. only 2 rgb (565 mind you) colors get stored for each pixel block, more color divergance (resulting from red and blue being 0) might result in the converter calculating darker than required color samples for the 2 interpolated colors, causing the normals to lean one way or the other when the 2 bit clor table tells em to use an intrepolated color.
