Models with custom textures not showing up in level editor

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Double-check that not only are the .dae file and the dds. files in the same folder, but that at least your diffuse .dds is actually applied to the model in Blender before you export. When exporting, COLLADA needs to find a texture on the model, otherwise textures won't appear on it later on and it will be invisible.

If that still doesn't help, check if you have flipped normals. Polygons appear two-sided in Blender's viewport, but in hpl they are invisble if you see them from the wrong side.