You will most-likely need a plugin called NVIDIA Plugins so you can utilize the DDS file format. You can also find a list of DDS tools on the Oblivion CS Wiki site.
Here are some tutorials that anyone new to Blender should read:
- None Yet
- Oblivion - How To Create Menu Icons using Adobe Photoshop
- Oblivion - Normal Map Basics
- Choose the right DXTC compression algorithm
- Texture Compression Techniques and Tips by Allen Sherrod
- Making Quality Game Textures by Riccard Linde
- Tips for Editing Normal Maps by Ben Cloward
- Tutorial - Dramatic Text on Fire Effect in Photoshop
- Tutorial - Realistic Scars
- Tutorial - Perfectly Imperfect Skin: Scarring
- Tutorial - Making a burn scar or wound texture
- Tutorial - OpenSkin editing tips
- Tutorial - Liquid Text
- Tutorial - Camoflage by TehBuddah