Ok, I'll try to hit all the questions here...
Texturing the tower was definitely difficult with the limitations I gave you. 1024* probably isn't enough space for a building that's going to be viewed up close. At the same time, games typically put far less detail (resolution wise) into the environment than they do into characters/objects. With your specific tower, you said you had holes ranging from 1* to 6* pixels. You could have reduced them 3 or 4* pixel, and probably been much better off. More about it later.
As far as filters go, most of them are bad. The only ones I use are some of the blurs (guassian = leetsauce), add noise, offset (under other), and unsharp mask when doing photo retouching. For everything else I use brushes and/or blending options (I've even started using blurs less though, in favor of the blur and smudge tool). Automated filters that generate highlights/shadows are less flexible than simply painting them yourself. You can maybe get pretty close to emulating whatever material you want with a filter, but you can always get exact with a brush.
Most textures use photos, it's true. But no textures use plain, unedited material photos. Let me clarify a sec, these are my definitions:
material: a basic, generally monochromatic image representing a single surface type.
examples -
http://www.stone.uk.com/images/newjpeg/Grub_polished1.JPG http://www.cnr.vt.edu/dendro/dendrology/wood/hard_maple.jpgtexture: a colored 'skin' of an object or creature; consists of one or many materials, with details (scratches, dirt, highlights/shadows, designs, wear & tear, etc.) layered on top
examples -
http://www.poopinmymouth.com/3d/dragon_tex.jpg http://www.poopinmymouth.com/3d/tri_severin_tex.jpgNow, tileable ground textures for a game, and environment/character textures are 2 very different things. Tileable ground textures can consist of a few photos blended on top of each other, with some color correction, and editing to make tileable. Environment/character textures are very different. You can't simply slap some material photos on a statue, and expect the game to do all the shading, and if it's not shaded properly, then complain about not getting enough polys. That's what you can do in movies, when you have a room the size of a gymnasium full of high-powered computers that render 24 hours a day. We aren't making movies.

If a detail isn't big enough to affect the sillhouette of an asset (I'm using "asset" as a blanket term for any object or character), then it is a detail that should be put into the texture, and not the model. This is where I got that 3 layer rule >
http://www.poopinmymouth.com/process/tips/dirt.jpg If you haven't looked through them already, I'd highly recommend looking through some or all of the tutorials at
www.poopinmymouth.com. It's honestly the best resource I've come across.
About your resizing (and about that hole sizing thing I refered to earlier), check out this article on PIMM >
http://www.poopinmymouth.com/tutorial/resize.htm(if you haven't figured it out by now, Ben Mathis = my hero

)
edit: How do I make some text a link with this new forum? I don't like having long urls littering my post...
edit 2: A little heads up - contest 3 will be a little bit different format than the previous 2 have been. It is going to be texturing intensive, modeling non-intensive, and there will only be 1 section, no seperate 2d and 3d. More details when we're ready.

:emerald: