Just 1 rule, if u are using glow type graphics (engine glows, windows, etc) i recommend u to NO compress the sprite. If u modify the sprite in gimp (or watever) adding glow effects and something like that, the same. The reason is that the compressed sprite will generate artifacts most visible in that glow sections. For example in the case of the typical power ship node that emit lights affecting surrounding areas, those surrounding areas will be more pixelated than the others.
At first, i noticed this when i started the Borg mod, all my green glows appeared pixelated in most cases, and i didnt know why.
The reason was that i was using DX5 compressed textures. When i saved again without using compression, the sprites appeared perfect.
So, in the cases that the ships are sprites without too much light or glowing parts, compression is recommended.
But there are more aspects to be aware, the resolution of the sprites. Its obviously that a sprite with a resolution of 2048x2048 should be compressed. Cuz the final result will be bigger than 10 mb. But in my case, even if i am using those kind of sprites, i never use compression for the reasons above. In some cases, i only use compression in the damage and hulk sprites, and leave the main sprite without compression.
The final result of the mod will be enormous (imagine about more than 500 mb…) but i really prefer the maximum quality. If u are using sketchup for rendering your sprites in high resolutions, all depends on wat u prefer, best possible quality or less size. Besides, since some of my sprites have a size between 512 and 1024, i cant use compression (it need to be multiple of 2) cuz i want the maximum resolution on the sprite (if the sprite has a resolution of 800, then i use 800x800 in the final sprite).
DX3 is used to low resolution images, while DX5 should be used in big images.
Generate mipmaps = ALWAYS. (if u dont want your ships to appear in “shiny” mode xD).
Type? i dunno, i just use the default value on gimp.
The other options,… i dunno, i just use gimp.
PD.: I already tried with different compression algorythms and different color modes, but the final result is always the same. I also noticed that the best color profile that will give u less compression artifacts (and in consecuence the best quality in compression files) is yCocg.