In general, the size of all game texture files should be a power of two. All older video cards require all textures to be a power of two (64x64, 128x128, 256x256, 512x512, 1024x1024, etc.) Newer video cards with new drivers and software may allow non-power of two textures.
I design my target rings at 1024x1024, and then resize them down to 512x512 before saving as DDS files. The default target textures include two lower resolution mipmaps, at 256x256 and 128x128.
You can read more about DDS textures and DXT compression this thread:
http://www.eq2interface.com/forums/s...ead.php?t=8414