To work in OC they need to be in BMP, GIF, JPG or TGA format, but I don't know if all of them work in NL. I know JPG and TGA work, but I haven't tested the others.
Those textures will have a lot of seams if you repeat them. To the texture resolution, just make sure they're square, they only have to be in powers of 2 in OC, when you import them in the game you can use different resolutions.