did you open up source sdk, set game to hl2dm and load hammer?
anyway, i recommend
VTFEdit.
yow
1) import image and save to vtf
2) save to your specified directory e.g. steamapps/username/hl2dm/materials
3) go to tools -> create vmt file
4) if not already in there, browse for the vtf file you just made in the 'base texture 1' textbox
5) click create and save to the same directory as the vtf.
6) close vmt window and done!