VTFedit settings

IMPORT SETTINGS:

Normal Format: DXT5
Alpha Format: DXT5
Texture Type: shouldn't really matter for most

(Ideally you create an image that is already a power of 2 pixels tall by same wide, if you do then uncheck resize)
if not:
Resize: Nearest power of 2
Resize Filter: Box
Sharpen Filter: None

Clamp: un-tick or width/height 64
Mipmaps: un-tick
Normal Maps: un-tick


FLAGS:
check the following:

point-sample
SRGB
Clamp-s
Clamp-t
no mipmaps
no level of detail
8-bit alpha