plepers
Encoder don’t support BlockBased compression formats (DXT1, ETC1, PVRTC) due to lack of available source code
DDS files already contains those texture formats. dds2atf extract them from dds to write them back to atf, making some additional work like pixel format conversions, lzma & jpegxr compression.
The second problem is that image datas in blockbased formats are internaly compressed using jpegXr with a pixel format unsupported by native flash jpegxr encoder ( 16bppBGR555 and 16bppBGR565). So to achieve BB compression we'll need to port jpegxr encoder to as3...
A ha, well then, it's time to rape the google :) For example, for DXT1 encoder I've found http://code.google.com/p/crunch/ (linked from http://lspiroengine.com/?p=260 where it seems to be some interesting code dscussion)
I've started to implement DXT encoding (the simple way), based on http://code.google.com/p/libsquish/
But i can't go further without BGR565 / 555 option in jxr encoder :(
Its a wip but I can push it to repo if you want to take a look.
16bppBGR555 and 16bppBGR565 are both mentioned in https://github.com/adobe/dds2atf/blob/master/3rdparty/jpegxr/jpegxr_pixelformat.cpp so there's a chance it is implemented there )