Ok here are my .dds settings in photoshop:
DXT3 ARGB (Explicit Alpha); 2d texture; no mipmaps
For the extra shininess, you can edit the .bmat or just take a .bmat of a piece that you definately know uses it (like almost every Titus armour part) and rename the textures accordingly.
I swapped the Titus torso .bmat with the powersword version and it seemed to work.
If you really want to edit the .bmat yourself, you'd probably have to insert this here:
Spoiler
<Element Class="Vector4Parameter" ID="3" Name="ReflectionColor" Type="object">
<Property Name="Value" Type="vector">
<Property Type="float" Value="0.197999998927"/>
<Property Type="float" Value="0.197999998927"/>
<Property Type="float" Value="0.197999998927"/>
<Property Type="float" Value="1.0"/>
</Property>
<Property Name="Name" Type="hstring" Value="ReflectionColor"/>
</Element>
<Element Class="TextureParameter" ID="4" Name="ReflectionMap" Type="object">
<Property Name="Value" Type="hstring" Value="sm_armour_basic_upres_torso_ref"/>
<Property Name="PackageName" Type="hstring" Value=""/>
<Property Name="UAddressMode" Type="int" Value="0"/>
<Property Name="VAddressMode" Type="int" Value="0"/>
<Property Name="WAddressMode" Type="int" Value="0"/>
<Property Name="Name" Type="hstring" Value="ReflectionMap"/>
Just be sure to change the names and colours to what you use, and the "ID=" parts seem to be consecutive numbering. Though i don't know if it's important what order you use.