They are compression methods. Hold on, I will edit with some pictures on what to do within GIMP.
EDIT
Alright. When you save your .dds file in GIMP, make sure you do EXPORT AS and then when you click EXPORT, you will see this window:
Click the drop box next to COMPRESSION. You see all of the options? Try to select DXT5 or DXT1, and hit "EXPORT". You may need to select formats too, but I do not think that is entirely necessary (but if it is, it will probably be 5:6:5 RGB). It has been a while since I've messed with the .dds files for Warband (I did texture editing and custom flag stuff). However, I can test it out further if you need more help.