Workflow information and technical details:
(much of the information found within is a combination of my own findings and documentation that can be found at the "modsrepository" online):

Radiant Materials     
- Must use *.dds or *.tga texture formats
        - *.tga can only be used when no alpha channel is needed. There are no options with this format.
        - *.dds should be used whenever alpha is needed with the following stipulations in mind:
            - DXT1: Only used when alpha is either on or off. No semi-transparency support
            - DXT5: Highly detailed alpha with support for semi-transparency.
            - DXT3: Lower quality version of DXT5.