You can use DDS for all textures except (growing list!)from what has been tested but there may be issues. Make sure to test it out.
They are also useful if you scale up the quality by sizing up images (with brand new textures or by resampling the old ones) since some cases (such as saving the game) an overlarge TGA may crash it.
Some previous testing suggested these didn't work properly:
- Small 32x32 inventory icons (need to check all other icons)
Water texture - TGA used for a water in a tile (tno01_water.tga, etc.)
Emitter - TGA used in an emitter (fxpa_smoke.tga, etc.)
It seems they can be used for most other parts of the GUI, ground and creature textures, and is recommended for these cases.
DDS Support in NWN:EE
There are 3 major ways of doing DDS files in NWN: