Note that the terrain COLOR textures for the scenarios that shipped with the game are 2048x2048, but the BLEND textures are 512x512. Both must be 2048x2048 when you load them in the editor. Covert .dds to .tga (or something), scale up the .tga using Photoshop or Gimp (or something), then save back as .dds. DDS Converter 2.1 (mentioned by couchpotato below) works for the conversion
Be sure to see this post for info on .dds formatting
Brian Ferullo wrote:See also this post
When playing the game, any .dds power of 2 texture should work, so you can scale terrain textures back down after editing if you want to reduce the size.