Hi, I just uploaded a guide to how the avatar clothes can be modded and adjusted here:
positech.co.uk/kudos2/modding_avatars.html
To create new clothing items you obviously will need some cool art skills 
But I’m sure some of you have them.
Feel free to ask any questions about how it all works here, and of course post your modded clothes.
Is there a non-plugin DDS exporter you know of? The only version of Photoshop I have is for Mac, and the NVIDIA plugins appear to be for Windows. If there’s a program that does it, I could make the image in OS X and reboot into Windows to make it a DDS (since I doubt there are any Mac programs that can create DirectX-related files).
EDIT: developer.nvidia.com/object/texture_tools.html looks like it’s what I was looking for.
There is also a plug-in for the GIMP that lets you edit DDS files. It can be downloaded at nifelheim.dyndns.org/~cocidius/dds/ This works with the latest version of GIMP for WIndows (2.6) I don’t know if it works for the Mac or not…but the source code is there if you really want to get ambitious.
Sam thank you so much for that… 
the good thing about being able to do this with the Gimp is it’s free… and getting the black spaces is not that hard, you just invert your selection 
Glad to help another GIMP user. It’s quite useful, and as you said, it’s free!!! Free is good.