You say that the TEXTURE is completely flat? I mean... I've never seen a 3 dimentional texture (unless you call a 2D bump map 3D). If it's the model that looks flat, that's just wierd. How do you mean "flat"? As in Paper Mario / steamroller victim flat, or matt black and no texture? If it's black, it's because you didn't specify ambience and shading in the GXL properties of the model's material before you saved it. I'ts a common thing most people overlook.

You know, you don't have to go to all that trouble with 3DS Max to Milkshape to whatever to MED, just import a 3DS model directly into MED. You will get a perfect model import aside from a texture, which you can import at any size anyway, because MED will resize the UV coordinates to fit the texture. (3DGS version permitting, of course. I refer to A6 and above here.) If you don't know how to texture for MDLs, just select to see lines in the skin viewer and export the image as a temporary UV map and colour it in any paint program. After you make a texture, reimport it to MED. (NOTE: some models cannot be imported into WED past, and I'm not 100% sure on the figure, but 65,535 polygons for models. Height maps can be much larger I think, but I made a huge 250,000+ polygon terrain that just died when I import it to WED.)

I know it's frustrating when you feel your work is good and you don't get the results you're after. I hope this helps you.