I dont understand what you guys are expecting? Turning on DXT compresson _will_ result in a drop of quality, regardless of implementation.
IIRC, wasn't the bug more to do with the alpha formats of DXT? DXT1 has 1 bit alpha, DXT3 has uncompressed alpha, and DXT5 has compressed alpha.
DXT5 looks the best with alpha gradients, as more info can be stored in the compressed 4bits, than uncompressed 4bits.