TXB Files

TXB is Bioware's "custom" image format for Jade Empire. At closer inspection however it turned out to be not quite so custom after all. TXBs are actually a bundle of two files: a TXI and a TGA. The TXI is a plain text file that contains meta-information about the image, which may or may not have been of use to the developers, but is not needed by the game engine. The game engine will happily use a TGA instead of a TXB if one is found in the override folder, but if both files are found in the override folder thn the game will use the TXB file. The engine does not care if there is a TXI for the image or not. Just delete it!

Converting TXBs to TGAs
You can use either Txb2Tga or JEFindRes to convert the image.

Editing TGAs
TGA (some call it "Targa") is a fairly standard - if old-fashioned - image format that can be opened with pretty much any image editor like Photoshop, the Gimp and surely many others.

When saving a TGA you need to preserve Alpha Channels, set the resolution to 32 bits/pixel and use RLE compression. Here's what the Photoshop dialog looks like: