It is in the 512x512 dimension
If you're trying to export the textures from 3DS Max to Hammer, make sure that the .vtf's are having at least DXT3 or DXT5 as compression method for the alpha (aka Eight-bit-alpha). You can change this in the bitmap parameters in the Wall Worm Texture Properties rollout (see image). If you
don't see this rollout, generate these settings by going to
Wall Worm (menu) -> Wall Worm Material -> Give Obj Mats+Tex WW Materials.
You should now see those options and be able to change the compression (DXT3 for 'sharper' alpha's, DXT5 for all other purposes), and then re-export the bitmap
and .vmt to overwrite the old settings. For the vmt this means it will now include either $translucent or $alphatest to enable transparancy in Hammer and in-game.