you can create a picture in gimp, but when you just convert it like that to a dds file, it'll be all black.
the solution (if using DXTBmp):
1. Create a picture in GIMP
2. Start DXTBmp
3. Copy-Paste the picture into your main image AND into your alpha mask
4. Make the alpha mask black/white, with the black parts to be filled in with the civs secondary colour (if i'm correct, might be primary) and i THINK (i only created bicoloured flags) the white part on the alpha mask will be filled with your main image
5. Convert the file to a dds 3 file
6. get the XML files to work correct