Kudane has posted the photoshop / Paint Shop Pro DDS plugin in the sticky above.
I thought I would also post some tools I found handy when dealing with DDS files when I was making Morrowind mods.
Most of these are unnecessary if you already have Photoshop or Paint Shop Pro, but hopefully there's something you can use.
The main site for these is http://fly.to/mwgfx/
There's a lot of handy stuff here.
"Show" is the main item. It allows you to view .DDS files, perform some simple operations, and convert among all supported file types. It's also handy for just converting a .tga to a .bmp for editing if you don't have PSP or Photoshop, but note that that won't perserve alpha channels.
TGAtool2 apparently lets you export an alpha channel from a TGA file and then edit it in MS Paint.
Haven't actually tried this yet.
Convim lets you batch-convert between supported file types.
Remember to pick up the DLLs needed to use these: http://www.mnwright.btinternet.co.uk/graphix.htm#dlls
Hope you guys find this useful.