Meanwhile, the DDS file is also 1/6th the file size of the RGB TGA, and it already comes with downsampled mipmaps, so the game doesn't have to create them on the fly for far away objects.
This means the DDS files skip the game and the CPU and go straight to the GPU's inbox, and the GPU is very fast. NWN uses OpenGL and places the work of drawing the screen onto the graphics card, which also knows OpenGL. Meanwhile, DDS is far better for NWN, or rather, TGA is not good for NWN. If you don't use the shades between the 64 shades of green, however, then you haven't really lost quality, it really depends on the specific image. For Example, in DDS there are only 64 shades of green, instead of 256.
DDS is much lower quality, if you have higher quality content.