"always_loaded.peg" does what it says on the tin. Whatever's in there will override any other versions that get loaded from other .peg files, regardless of resolution. This is what I used for the ReFabricated Patch. Mainly because I wouldn't have to replace the same texture in multiple .peg files.
You can if you want. It's already being compressed into a .dds though. Only the image size would need to be upscaled. The actual contents of the image can remain as they were. (Although in some cases, you might want to apply some gaussian blur to help hide the larger pixels.)