Seems a small bug slipped through the net with the VTF Shell Extensions which was causing problems with VTF textures generated without MIP maps. I’ve made and update so you can download and update to the latest version to fix it.

In short, images without MIP maps were showing strange, interlaced looking thumbnails. There was also an issue with really big non-MIP images crashing explorer. This was due to the large ammounts of memory needed to generate thumbnails from the fullsize image rather than a MIP level. As a get-around for now the extension won’t attempt to generate thumbnails for non-MIPmapped images greater than 512×512 pixels.