FPSC will take DDS files, use either DXT3 or DXT5. The difference being DXT5 uses a better alpha map at the expense of an increased file size.
Alternatively, I think you can use a BMP file with the background plain black (0,0,0). I never use this as the result is unnecessarily large files.
Lastly, since the two questions you ask seem fundamental to the operation of the program, I suggest you Google tutorials for the GIMP and read the guides in the stickies. Finding out for yourself how to do things is far more rewarding and you will learn a great many useful skills.