The path to skinning glory seems to open at your feet by this point. Just wait till you import it and you get a nice all black APC :o). Follow these instruction, and you *may* just avoid this toil.
From the menu, click . If you've been following the flag tutorial, or have imported some other graphic, you'll now get a warning along the lines of "Because of the limitations of the specified fole format, the saved file will be limited to a merged image". What this means, is that all of the layers have to be merged to follow the DDS standard. This is no problem since you've finished, so click , and take a deep breath.
You've just been presented with a bewilldering array of options for saving your file. Rather than let you click random boxes in the vain hope of getting the right setting, we'll take you through it one step at a time.
Save Format - Click (No Alpha (DXT1))
MIP maps - Click (Generate MIP maps)
Options - Select Nothing
Fade MIP Maps - Select Nothing
Select Formats to preview - All boxes should be ticked, minus (emulate xbox DXT1(Alpha))
Preview Options - Everything selected, except (Show Differences (Magnified 10x))
Above the nVidia logo, select "2D Texture", and click save. In the bottom left corner of Paint Shop Pro, you'll see a message saying "Writing DDS". This can take some time on ricekty computers like mine, so go and make a cup of tea or something in the meantime. Hopefully when you come back, everything will be compiled up and ready to rock.