>The sharpness is gone.
Isn't that a good thing, really? It's mathematically correct, plus it will help fight aliasing.
Well, I don't know the technicality of these things but the texture did look a bit washed out, kind of blurry. But now, with the fix I mentioned, the texture looks crisp without any glitter. I will explore more this Nvidia dds Format thingy too see what other kinds of results I can get.
NOTE: I wonder what's the advantage if any when a texture is sharpen via the Nvidia DDS Format settings or just sharpening the texture manually with Photoshop? I must say that via Nvidia DDS Format the sharpening results looks beautiful and natural without any pixel artifacts and whatnot.