To clarify what I did. (refer to image below)
I loaded up my ms3d object in Milkshape, selected the group, then on the materials tab I created a new material and loaded my image/texture.
I adjusted the texture using the Emissive button and selected white to give a brighter texture.
Lastly I used Assign to assign the texture to the object.
I was able to see the texture applied in the 3D view.
I also verified that my texture coordinates (UV) that I applied in Blender were still assigned in Milkshape by using the Window->"Texture Coordinate Editor" option.
Attachment:
milkshape_texture_setting.png
But when I bring it into FP using the same texture my rock has really odd shadows/lighting and generally isn't as bright as Steve's example.
I'm missing something so if anyone has clues it would be helpful!
thanks,
-mark