If this is in CFS 3 then I know what your problem is. I had run into the same thing while trying to add custom nose art of my own. you need to first save a regular bmp into the folder:
Microsoft Games\Combat Flight Simulator 3\uires\gbr\noseart and save a plain 24 bit bmp. then save an Identically named file to the folder:
Microsoft Games\Combat Flight Simulator 3\aircraft\shared in DDS format using DXTBMP.
and then it should work. If this is not in CFS 3, I don’t know of any other reason the nose art isn’t showing up. But this will come in handy if you DO decide to make nose art for cfs3
P.S also I am a Photoshop 5.5 fan myself