I'd like to announce my new method of compiling terrain textures compatible with the Ogre::Terrain shaders.
I found out about the cross-platform
crunch library that allows to create DDS textures from a commandline. Together with ImageMagick I created a compile script that will create .DDS textures from 4 separate PNG input files.
The rationale is that an artist creates a terrain texture as 4 separate PNGs (diffuse RGB image, normal RGB image, specular greyscale image, and heightmap greyscale image). All those are stored in a source folder. To get the textures in the Ogre application one has to run the bash script that will compile the correct DDS textures.
I've documented it on the wiki:
http://www.ogre3d.org/tikiwiki/tiki-ind ... mageMagick
Hope this is useful for someone else too. The script is bash (linux and mac), but with a few minor syntax changes one could create a windows .bat, or even better: create a multi-platform python version

.
For me, it makes the textures more understandable. It's easier to work with PNG files than those DDS things, especially because of the alpha channels that contain information not related to actual transparency.
In fact, a similar approach could be used for your entire material setup. This has the advantages of working with a familiar and manageable png format (that is lossless!) while retaining the GPU memory reduction advantage that DDS offers.