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"don't do things the old way"

Blender's material system has never mapped well to the DTS file format's material system, therefore a decision was made to move away from the use of Blender materials in favor of allowing direct control over DTS material settings in the exporter user interface.  Even though the use of Blender's materials to control DTS material settings has been deprecated for several versions now, there are still many tutorials available on the web that will instruct you to do things the old way. It is no longer necessary to set up Blender materials at all.  Don't do it unless you really want to, because you're just complicating things for yourself.  Admittedly, part of the problem has been the lack of formal documentation for the change in material setup, one of several situations that this document is intended to remedy.

Some may disagree with the decision to abandon the use of Blender's material system in favor of moving the material settings directly to the exporter user interface, so I'll go into the reasoning here:

• You don't have to hunt around in the Blender material settings for the "magic buttons" that actually have an effect on the exported material settings (and usually not the effect that you would expect).
• You don't have to create Blender materials, re-name them, assign images to texture channels, assign material indices to faces, etc.
• All you have to do now is UV map your meshes. All of the material settings are right there in the exporter GUI.
• Blender materials are only looked at by the exporter as a fall-back for backwards compatibility when no UV mapped textures are present for a given face/mesh.

For historical purposes only, here is a link to a tutorial for using the old style material system:Old (depricated) material setup instructions  The linked instructions are provided for historical purposes only, so that you can compare the old way of setting up materials to the new way.

I am not personally opposed to the idea of going back to Blender's material system should the Blender developers enhance it to be more flexible. Some other modeling packages such as Lightwave and Houdini allow the user to set up custom shaders and/or materials with custom parameters. With the introduction of pyNodes (python material nodes) and GL materials in the 3d viewport in Blender 2.46-2.48, Blender may be a few step closer to this.  Unfortunately, the python API support for pyNodes is still a bit lacking, and the options availible for displaying GLSL materials in the 3d viewport are very limited.