Model Texture doesn't show up.

Let me go through the entire process in which I compiled the model and texture to see if you can pinpoint the problem.

First of all, I open 3Ds max and import a PSK model file. I think export it from 3Ds max as a DAE. I head on over to XSI mod tool and import the DAE file. I resize the model to the appropriate size then go to Material>Lambert then Texture>Image>New from file> then texture file. I then close out of that, the texture is applied. I go to Selection>Geometry Approximation>Polygon Mesh> and uncheck Automatic Discontinuity. I then freeze transformations and model history. I created the reference, phys, and idle SMD files. Then I create the QC file which looks like this.

I then drag and drop the QC file into the studiomdl.exe. It succeeds with just 1 problem.

No one has told me how to fix it so I skip the error for now. I then create a VMT file, the contents look like this.

I changed the name to the original tga file.
Then I dragged the tga to vtex.exe, the VTF is created, I place it in the Materials Bioshock Trashcan folder.

Then I test it out by going to the model viewer. The texture doesn’t work, but the model does. I don’t get it. I have been trying for a day now.

Ok I am tired of messing with this, I want to see if any of you can get this to work.

PSK Model file.
http://dl.dropbox.com/u/3801241/trash_can.psk

Texture File
http://dl.dropbox.com/u/3801241/TrashCanC.tga