DDS is nice because if it's superior loading time and size (others may be smaller, but not in memory!), but whatch out if you have gradients in your image (either in the rgb or the alpha part), DDS makes this a bit worse. You can fiddle with the color key involved in the compression but basically gradients break the advantages in my oppinion. I also don't use them for texts. But for general textures they are good.

Other than that, - does somebody know if I put a movie stream on a bitmap, if I can access the contents in the pixel shader via tex2D? If so, you can actually do what you suggested: Just export the movie twice: Once regular and once just the mask. Then, you play the RGB movie on skin1 of an entity and the alpha-movie on skin2 and in a pixelshader you lookup RGB on skin1 and use the R part of skin2 as alpha in the output RGBA tupel of the pixel shader.

But thats just theory and is only possible if you can access the stream media in the pixelshader - which I don't know, as I said