He does mention to save in BC3/DXT5 and generate mipmaps, but what does BC3 mean? Also, is there any other changes in the Nvidia save settings, or the Nvidia NormalMapFilter settings to change? It is the Normal which is causing texture to show a misaligned join between the knee and the ankle on all pants. An example, he does mention the resolution size difference of the DDS Norm, but not what to do about it? Looking at examples you need to crop downwards to a square DDS 1024x1024. Please, I am grateful for the Tutorial from MisterS but maybe a more defined tutorial would be much better. However, I do have problems as there is a displacement texture join on CAS pants (trousers) between the knee and ankle and cant find a way to rectify this? Also to say, I have tried the 'Normal Map Online' and in my view is not very good, I get much better clearer results with Nvidia NormalMapFilter. I use Corel PSPx8 using the Nvidia DDS plugin and NormalMapFilter, and then the adjustment in Channel Mixer set to Mono and adjust the Red Green & Blue to get the right elevations and lightness for the bumps to look OK. Fiddle with the settings until you get something that you feel will be bumpy enough for your texture. To use them, open a copy of the texture and apply the Normal Map filter. I'm afraid these tutorials are only appropriate for Photoshop, so this is only a rough guide, helps a little. To create a normal map using Photoshop or Paint Shop Pro, you can use NVIDIAs normal map tools, available here.

Paint.net normal map plugin