a bit late but … these are the settings i use with paint.net
Texture File Formats
ALBD - .DDS- BC1 (Linear, DXT1)
ALBD (Blurred) - .DDS- BC3 (Linear, DXT5)
NORM - .DDS- BC5 (Linear, Signed)
COMP & Decals - .DDS- BC7 (Linear, DX 11+)