Why would you want to open a DDS file with PS or GIMP? The DDS file is only after you're done painting the PSD file, and you're ready to put it into the game.
Then you create a folder under this:
My Documents\SimBin\RACE 07\CustomSkins
Name it the name of your race group, or your cat or dog, anything. Then in that folder put a folder with your name on it. In that folder put your DDS files and your INI file. In CustomSkins is a file called TEMPLATE.TXT that shows you how to set up your INI file using notepad.