Weird thing: the skin actually appears correctly on the car booth...


Besides that (second issue), any DDS file present in that folder is considered as skin, but it can't be loaded either.
Here I had taken my own Icon.dds out of my skin and placed it aside the actual skin.zip file:

Of course the icon.dds does not match the model, but the game should simply ignore "skins" that have the size of an icon (128x128)

Original finding by Sparkster.