I may be understanding incorrectly, but if you want to use dds textures in UT99, it appears you want to use DXT1 per this comment
. There's info scattered across the BeyondUnreal wiki like here
which I'm guessing you've seen already.
Slightly off-topic, but kinda related: I've read the UnrealEd 2 can handle textures up to 1024x1024. If this is true, I'm curious why I don't see maps using textures higher than 256x256,JackGriffin
if you find out that UnrealEd 2 can also handle DXT 3 and 5, please let us know, seems like that would open up some possibilities...