Can Milkshape export as .blend files? If not, you could always just import Milkshape files into Blender and re-export them.
There are two issues:
1. You are using Milkshape to make bricks. That's a plain wrong thing to do because milkshape triangulates. While Milkshape would be a good thing for .dts, .blb supports quads. Your brick has around twice the faces it should have.
2. The closest format Milkshape can export to Blender is .obj, which is the exact format used for conversion, however, in personal experience, Blender was a little bitch in importing .obj files, bunch'a additional modifications required to be done after that.