I think the problem is not in the way you save your textures, but in your FS. Repaints either work or don't work, but they don't crash the game after 30 seconds.
I suggest you reinstall, but maybe that's not your best option...
Any other suggestions?

Quote:

I obviously don't know which Cherokee 6 we're talking about so I did a quick search & found this one here. http://www.simviation.com/fs2004props63.htm

It might not be the same one but on this one the original fuselage texture (cherokee6_fuse.bmp) is in 256 colors (8 bit). You can find out the format by opening it in DXTBmp. You should be able to save out in this format direct from Photoshop after repainting. If not you can save in 24 bit & use the 'Extended 256 colour' option from DXTBmp to convert it. I tried & it works fine for me. I think all the other main textures are in the same format.  Make sure you don't paint the transparent prop disk textures.