Flag moddeling help plz!!!

[Smalbom]

Can someone tell me what I have to do to make my own skin for the flag??? I tryed making one my self and thought every thing was good until I went to inject it in the game. For some reason It kept saying that It is not a DXT1 yet I saved it as a DXT1??? Does anyone know what I am doing wrong?

[PRiMoiCoN]

save it as a dxt2 or a dxt3