Adobe Photoshop CS
with the nvidia plugin for manipulating .dds files of course.
But for any kinda of graphics manipulation you just cant beat Photoshop CS
MorpheusDead
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“It is a curious thing, that God learned Greek when he wished to turn author--and even more curious that he did not learn it better.” (Friedrich Wilhelm Nietzsche)
I've switched to paint.net from PhotoShop SC. It can do most of what PS can do, great plugin system, light weight(loads fast) and it is free. You can get the dds plugin in the plugin section of the forums there.
I think the "best" program depends on your personal preferences. I have great success using Paint Shop Pro 9 (with the DDS plugin for PhotoShop), but I use it for all my graphics and can't imagine using anything else.