Thank you Tino, I will test it out really soon. Tomorrow is going to be a busy day, but I'll hopefully find some time.
I can quickly answer the DDS header question though... Yes they are output from both Dolphin Ishiiruka (when dumped as DDS) and the Ishiiruka Tool like that. It's really a non-issue when it comes to Dolphin/Ishiiruka, as both don't care about the header data. The only time it matters is when trying to open them in a raster graphics editor. Since the flags being set, or rather the ones not being set are (non-standard), most programs don't know what to do with them.
I'll try to break it down, but I'm not really good at putting it into words. I am basing it off this chart which I created when reading into the documentation on Microsoft articles.
Here is a texture that would dumped with Ishiiruka or created with Ishiiruka Tool. The
44 here goes against the standard, and all image editors can't open it as is.
- The value
40 means it should have data in the RGB fields, which is only true for uncompressed textures (RGBA8/ARGB8/L8/A8/LA8).
- The added
04 means it has FourCC or rather its compressed (DXT1/DXT3/DXT5). This much is correct.
- In other words, the flag set up in this way is like saying its both compressed and uncompressed at the same time.
Here is a texture created with TexConv compressed DXT3 which has alpha, the sum of flags should be
05 which is most commonly seen in all DXT3/DXT5 textures.
- Since it's a compressed texture, the FourCC field will contain a value (44 58 54 33 = DXT3) so
04 is added.
- DXT3 and DXT5 always have DDPF_AlphaPixels set, so
01 is added. I've
never seen a program write a texture with DDP_Alpha (02) flag set.
- Most DXT1 textures don't have alpha, so they end up with a
04 here. I'm not sure if DXT1 has a
05 here if the texture has 1 bit alpha (but I imagine this to be true). Unless DXT1 uses the above mentioned DDP_Alpha (02) flag. I'm not really certain at the moment.
As for the next set of flags, it's uncommon to not see these in DDS textures. Basically all of them always have
08 10 40 regardless of the characteristics of the textures. Maybe most DDS writers do this as a fail safe as it doesn't hurt to have all the flags here, but it does mess things up when they are missing.
At the bare minimum, every DDS texture should have at least the
10 set, as it says "this is a texture". Some writers do actually correctly write these flags. For example, if a textures does not have mipmaps, it will omit the mipmap and complex flags
08 and
40 but this doesn't seem to be necessary as they always seem to work when included. Most textures include all the flags, even when it doesn't have mipmaps. The DDSCaps_Complex to my knowledge means that it has more than 1 surface, so if it has mipmaps, it is also complex.
But yeah, if you are setting them up this way for a specific reason, then do ignore this.

The textures work in Dolphin even with the flags set up this way. The only reason I mention it is because the textures will not open in graphics editors with the way the flags are currently dumped and created in Ishiiruka Tool, and fixing them to the "correct" flags allows them to be opened. The correct flags would only be a minor convenience to make them easier to modify.