Thanks for your reply!
DXGEdit does not support PNG. Or are we using an outdated version? Would PNG reduce memory use as well? If it's only the size of the DXG that is reduced, than it does not help us much.

We use BMP, we had to reduce sprites to 8 bit because our sprite files were in excess of 600MB. Quality loss is very little with 8 bit, but load times and disk space usage is halved. They work just fine on a 16 bit surface, but it seems they are converted to 16 bit during the load. This means we do not spare on the memory usage.

Memory use is one of our concerns at the moment, as the game is using in excess of 400MB.