It's been a while since I've played around with DDS files but the concept behind them is incredibly clever and understanding what the game is doing with them helps to understand how to edit them.
Basically the distance the game camera is from your object dictates which of the individual DDS images is used. If your object is a long way away it will just use the smaller images. As the the game camera gets closer it will use larger and larger images. This process keeps down the resource usage within the game allowing the game to run much smoother.
The DDS files themselves usually consist of a collection of square images with pixel dimensions 2 to the power of x (1024, 512, 128, 64 etc).
When you edit them you should be able to discard all but the largest file (lets say this one is 512 x 512 pixels). You can then do what you want with this largest image. Then when you reconstruct the DDS file, the program should automatically resample and resize the other images for you. At that point you can retouch anything that looks a little off.
