Hello,
Another method would be, using the modding tools of The Witcher 3, because they use same file formats and it's also used for changing the xbm file to another format. There are some tutorials about extracting on youtube, or elsewhere. You could use these tools for changing the formats and maybe also for uncooking and cooking, or just use the old red tools for this process.
I found a .xbm .dds converter in the worldofplayers forum in the german section. There are two downloads for changing file formats. I tried the first one and it worked, but I don't now how and I did not figure out how to change the file format back into dds. The second download has also a text with english description, maybe it will be helpful. The files are found in the first post of this thread under the title "XBM Converter to DDS" ( the first download) and "Anleitung zum modden" (the second download). The link:
I am not sure, if I understood the question in the right way, but you could use the Red Kit to do this Job.
First you have to download an install it, start the red kit , after that you have to open the asset browser in your Red Kit and search the texture you're searching for. Manny of the NPC and Player textures are in the characters folder.
The alternative is to search for a certain texture with the asset browser search you have to use CBitmapTexture as a filter, if not you will also serach for other stuff like meshes or templates.
When you've found your texture you have to right klick it and klick export asset (in the asset browser window). If you don't see export asset as an option than the texture is not loaded in the Red Kit. You must either right klick and then klick load from disk or double klick it, close the window and after this process the shoud see the esport asset line. If you click export asset, a window opens, in which you can define the place where you like the file and which file format you like .dds or .tga for example. Save the texture file.
Edit the texture file and then use the Red Kit again to import the file. You have to right klick in the asset browser window and go to import and then 2D Texture. Then a window opens, in which you search for you file, you've found it, klick ok. Then you are asked as which sort of texture you would like to save it in the Red Kit. It is not important you can just klick ok.
( OPTIONAL: You could choose other options as Worlddifuse. When you browse the texturefiles in red kit you see that there are different texture gruops used. I don't know if it efects something but if you want to bee consistent you can use also the texture grups of the original textures.)
Now you're file is changed into xbm format.
(Explantion after this point: realy unprecise explanation of modding with the red tools )
If you want to use it in the main game you have to search the new or changed . xbm file in your data folder of the Witcher wild hunt folder (not sure where to find it on steam versions????). Then you have to uncook the pack0.dzip file found in the cookedPc folder and paste your changed .xbm file into the right folder (texture has to replace the other, must have the same name) and then cook the pack0.dzip file again.
(for more precise instructions on how to mod with Red Tools (for The witcher 2) search for tutorials on youtube or elsewhere).
To make you search in the data folder easier You could make a new folder and import the texture into this particular folder. Please make sure that you've created the folder in the Red Kit or before you started it, otherwise you wont find the folder in the Red Kit asset browser.
Sorry, for not taking intrest of writing perfect English, and sorry for this messy post, hope I helped you al little bit.
Best regards Nemo