Quote: "endless trails of entities across the sky"
Endless trails across the sky is caused when the engine does not load the skybox. This could mean either the path is incorrect or the format could not be read/converted properly. Recall that the engine has been coded so that if you use PNG and have your texture settings set to high, the PNG will be changed and produce a DDS file. Same goes for TGA-->DDS, BMP-->DDS (unless it got broken during one of the BETA updates). There was an issue a while back where some skyboxes were not copying/showing correctly and it had apparently been addressed. A lot of the skyboxes available were in DDS, PNG, BMP, TGA, and JPG. I ended up redoing all skyboxes to use PNG myself. I work in PNG strictly for file size only on a file deployment. DDS usage is good for detail, but with huds and text, there is no real difference between the DDS or PNG except file size.
The engine will read black as transparent, and therefore will either not load at all (producing endless trails) or show white (thinking the color you selected is black). We know this first hand as Cathy has done quite a few skyboxes. If you are certain you did not use a true black (RGB=000) and you convert to DDS and still have the issue, check to ensure the skybox file (the X file for that skybox) is pointing to the correct texture file(s) and extension. I recall having to edit a few X files for skyboxes to change them from one extension to the one that was in my folder.
In case you need reference to the different formats of DDS...
DXT1: This compression should be used when the texture has no transparent pixels. For converting JPG textures you always have to use DXT1, since JPG doesn't support transparency. For converting PNG or resaving DDS you have to check the texture for transparency first. DXT1 uses fewest memory of all, so you should use DXT1 whenever possible.
DXT3: This is used for textures with binary transparency. That means, the pixels of a texture are either completely transparent or not. For saving the alpha channel (alpha is the transparency in a picture) extra memory is needed. Hence DXT3 needs twice of the memory DXT1 needs.
DXT5: This compression is used for textures with multilevel transparency. That means, when the pixels of a texture are partly transparent. That's often used for window- and particle-textures. DXT5 needs just as much memory as DXT3.
the resolution: The resolution for textures is very important. Only edge lengths with 2^n (power of 2) are allowed. To be more specific, all values from 2^2 to 2^11, in numbers that are 4, 8, 16, 32, 64, 128, 256, 512, 1024 and 2048. A texture doesn't have to be square, it can also be rectangular. E.g. not only 256*256, but also 256*64, or 256*1024, or 2048*512, just to name a few examples. Reason is the divisibility by 2. Furthermore some AMD/ATI graphics cards have problems with textures, that doesn't match there resolutions.
There's no problem that can't be solved without applying a little scripting.