Quote: "UDK does use the .dds file format for textures? Or must I convort these to?
"
Of course not, that would be easy...and its never easy. Gotta convert them to tga or png.
Also: You can use milkshape or fragmotion to convert that jazz. If you insist on using some other software, you can download the autodesk FBX converter. That thing however does either refuse to save smoothing groups or saves every group of your mesh as a single model.
And remember: once you use UDK: Its never easy
-Wolf
Creativity is allowing yourself to make mistakes, art is knowing which ones to keep.