That's exactly it -- extract to PNG with SimPE, edit, and then Build DXT to put the edited textures back in. It is very useful, I have downloaded a huge pile of Maxis-match retextures from Piggi's, and I didn't like either of her two blond shades (and neither matched Maxis, unlike her other colors), but she puts her grey recolor in one of them, so I was motivated to find a solution that used her original file. ;) (The two disliked textures turned out to easily combine to make one I liked!)