You can download a plug-in for Photoshop, so that it can handle .dds files...
I forgot from where I got it, but I can upload it somewhere if you'd like.
i found it on google, when i run it it open ps and when i try to open the dds file it still says its not the right type of document.. am i doing anything wrong?
Nvidia has info and the drivers for Photoshop and Paint Shop Pro. Some PSP users need to use older versions of the plugin. The rFactor modding forum has a lot of information since the files are saved in DDS format. Search on 'nvidia'.