It never worked. There are four different texture formats in PA. A8R8G8B8, X8R8G8B8, DXT1 and DXT5. The texture editor can read all of them, but can only edit the first two formats (i.e. sky boxes). DXT1 and DXT5 are a lot harder to encode. There is some code that allows you to import images into the DXT1 papafile, but it's not very good and the tool papatran that comes with PA is a lot better. The texture in your screen shot is DXT5, I believe. It should say at the bottom in the status bar that is cut off in the picture you posted. That's why the options are greyed out. Maybe I'll get round to implementing it someday, since it's a rather interesting optimization problem, but probably not any time soon. They way to do it, is to use the papa texture editor to export to png. Then edit the png and use papatran to convert it back to a papa file again. The error you posted is some sort of Qt4 funkiness and can be completely ignored.