I tried going from my usual low graphics settings on start to high. Most things looked nicer but the ship textures looked really really grainy. They actually looked worse than they did on low quality settings mode.

I started the game on high quality from the start via the dialogue box and it created high quality DDS textures.

I think the problem is that switching from one graphics quality to the other in game doesn't generate new DDS textures.

I can switch from low to high in game now without grainy textures after having generated the DDS textures earlier. Unless you start the game from load in a certain graphics quality mode it doesn't look like it checks if the DDS textures for that mode exist.

oh