The SGX driver should do the compression automatically.
It won't. PVRTC compression takes a lot of time and should be done off-line on a PC.
There is a lot of R&D into realtime DXTC and it is perfectly possible (although most of the code for it is x86 only). The published realtime methods so far are not very high quality, but hopefully that will be changing soon...
Vanilla DXTC doesn't work well for lightmaps, but for most other Q3 textures it's very good. With the tight dot pitch on the Pandora I'd have thought you could also drop a mip level without hurting image quality badly (and losing one mip level reduces texture memory footprint by 66%).
I know Simon Fenney of Imagination has done a lot of research into PVRTC in the past, including realtime, but I don't know what his more recent results are. I would have thought there's a good chance that it would be in any SDK that is provided for the chip.