The method used by my mod,
Deus Ex Nihilum, is based on
Kentie's Direct3D 10 Renderer for Unreal. So essentially you have subdirectories under ...DeusEx\Textures matching the texture packs' names, type of the texture (Glass, Rock, Metal, etc.) and of course the name. They're in
DDS format and with the
NVIDIA Tools installed you can save textures to DDS straight away in Photoshop for example.
It can also be used to enable height/bump maps and I've already implemented it in my mod. I actually didn't know you could do it in the NVIDIA Tools, I made and saved the height maps manually. If I had time, I'd enable some kind of height/bump maps for every NV texture used by DXN (given DaveW's permission and finally having to figure out how to extract those textures to begin with) but I think that stage's just going to have to be one for the ages.
Essentially this means that you're required to use the D3D 10 renderer with DXN (or, of course, every mod that uses DDS as textures) if you want the mod to look like how it was meant to be.
Hope I helped!