How do you make flag graphics?

[Basket Case]

How can I create my own flags? Neither DDS converter nor the GIMP plug-in produces correct files by default (i.e. in the game the flags don't show up). I don't know anything about DDS or textures but there must be something special about the format of the flagdecal files, because unlike the leaderhead files for example the GIMP-DDS plugin can't load them correctly (all flags are just transparent planes with nothing on them when loaded this way).