Ok now you are confusing the New guy!  (but I am learning)

Flix - Why png?

As of now I have deleted my jpeg rock wall and went back to an earlier version that was still a psd and I am doing all my work now in the psd format.

So my question is (drum roll please) Regardless of which format I will use when I put it in the game, which is the best format to work in while creating the texture?

.psd, as long as you are working on it. Afterwards tga imho

Granted, I haven't kept up with the latest games, but I've never seen a game that used all tgas for its textures.  Every Q3-based game I've seen has used jpgs or DDS, which IIRC, are just files w/ jpgs of various resolutions...  For the HD space and texture memory(presumably) you'd take up using tgas, I don't think it's worth avoiding the random problems that MIGHT popup using jpgs...
I say use jpgs unless it starts giving you a problem, then use tgas or whatever works.  But on a cosmetic basis, you will hardly ever notice a difference, and file size-wise, jpgs definately have the upper hand.

textures i allways make jpg, as soon as i want to use a shader i usualy use tga anyway.

TGA is great in HL2.
You need to turn them into .vtx, which is around 33% the size of the TGA.
No idea how they did that, but you don't lose any quality.

IMO, better format than TGA is PNG, which is also loseless, but as good as jpeg on compression.

I've been using PNG in Flash lately.  I love the alpha mapping.