The tga files are not DDS files.
The game engine uses DDS files for textures and
skins but you can refer the FPE file to a tga
file and the engine will convert it to a DDS
all by itselfe. (To make it easier for you)
If you make an entity and place the .Tga file
in the texturebannk. Then you refer the FPE to that
.TGA file. Then you run the game engine with your
new entity and then visit the texturebank folder again
you will see that there will be a DDS copy of your
texture/skin. (that the game engine has created)
When you decide to edit a .Tga texture that is
already in use make sure to delete the .DDS copy
because if there already is a .DDS copy the engine
will use that one and not make a new one from your
edited .TGA file.
You can also just work with DDS files from the start.
The .Tga support is just to make it easier on you
because it is a more widely used format then the
DDS format. (atleast in NON developer cirkles)
I hope this makes it a little bit clearer for you,
or more confusing.