The Blender Source Tools imports SMDs and then "removes duplicates" to weld all vertices in the same spot together, regardless of whether they should be welded or not. I'm pretty sure many people prefer that above every triangle being a seperate thing from every other triangle.

Update to Blender 2.71.

Try uninstalling the SMD Tools, whatever those are, close Blender, re-launch Blender, and install the Blender Source Tools. I don't remember what I did to fix it, but I think it was something along the lines of that.

Oh, right, that tool. I'm sorry, I thought this was in the Source FilmMaker forum... (I'm subscribed to both this and that forum, and there only rarely arrive new discussions on this forum.) Well, due to the many options for VTF files, and the fact Source 2 (which natively supports TGA files) has been released for Dota 2 and might not take too long to arrive for other Source games, I'd personally say a VTF exporter for Blender might be quite... well, clumsy? I wouldn't mind one being made, not at all, I'd just prefer it to not be a part of the Blender Source Tools themselves.

...And VTEX is?

What are you trying to do, specifically?

Edit: Sorry, I thought this was in the Source FilmMaker forum...

...As info on the tool states, you direct it to something like C:/Program Files (x86)/Steam/steamapps/common/Team Fortress 2/bin.

The "new maximum"? Well, with >108 units (somewhere between 108 and 109 units in my test), I don't think there is a maximum. But as I pretty much only use the DMX format, don't expect me to figure it out...

At least it supports 108 units of movement in VTA flexes for SMD models.

It does.