Here’s the result of the modified DXT1 colour compression experiment:
The left side is standard DXT1 texture compression. The right side is the modified version, which involves shortening the reference colours to 15-bits and using the 2 spare bits as an “exponent”.
The colours in the dark shadowed regions look a lot better. Here’s the zoomed in version. Notice the blotchy dark green patches in the left hand image:
Considering this has the same compression ratio as vanilla DXT1, I think it’s an improvement, and I’ve yet to notice any noticeable difference from dropping from 16-bit to 15-bit reference colours.
It works well for my data set because I’m using baked in lighting and shadows, so there are a lot of dark areas which benefit from the extra colour depth the modified algorithm proves at low intensities. If the lighting were dynamic, the base textures would have a more consistent brightness and there may not be much visible benefit.