tboo and oldfart: I have an ELSA Gladiac GeForce2GTS and used to use the older 108kb Loki OpenGL Driver to run the S3TC textures. I upgraded to the newer 112kb Epic OpenGL Driver and got the same problem as you guys did when I changed the commandline to UseS3TC=True, where the compressed textures were not used. Anyway, after changing it back to UseS3TC=1, I saw the compressed textures again. The new 112kb driver is also coded by Daniel Vogel, who is now working for Epic, and I see less missing texture problems and a faster framerate with the newer driver. Here are my settings:
[WinDrv.WindowsClient]
WindowedViewportX=640
WindowedViewportY=480
WindowedColorBits=32
FullscreenViewportX=1024
FullscreenViewportY=768
FullscreenColorBits=32
Brightness=0.600000
MipFactor=1.000000
UseDirectDraw=True
UseJoystick=False
CaptureMouse=True
StartupFullscreen=True
CurvedSurfaces=False
LowDetailTextures=False
ScreenFlashes=True
NoLighting=False
SlowVideoBuffering=True
DeadZoneXYZ=True
DeadZoneRUV=False
InvertVertical=False
ScaleXYZ=1000.000000
ScaleRUV=2000.000000
MinDesiredFrameRate=30.000000
Decals=True
NoDynamicLights=False
UseDirectInput=False
ParticleDensity=0
NoFractalAnim=False
SkinDetail=High
TextureDetail=High
[OpenGLDrv.OpenGLRenderDevice]
UseGammaExtension=1
UseModulatedGamma=0
MinDepthBits=32
MaxLogUOverV=8
MaxLogVOverU=8
ShareLists=0
AlwaysMipmap=0
DoPrecache=1
Translucency=True
VolumetricLighting=True
ShinySurfaces=True
Coronas=True
HighDetailActors=True
DetailTextures=True
MaxAnisotropy=16
SupportsLazyTextures=0
UseTrilinear=1
UseS3TC=1
UseTNT=0
LODBias=0
UseMultiTexture=1
UsePalette=1
UseAlphaPalette=0
UseVSync=0
Description=ELSA GLADIAC
Edit: Finally, I've heard that changing the UseTNT=0 to UseTNT=1 might help solve problems with the ATI Radeon.
GameBasement talked about this while using the older 108kb driver. I don't know if it still works though with the newer 112kb driver. Hope this helps you guys.