I'm currently porting a game engine from OpenGL to Vulkan, and had some trouble getting S3TC compressed images to work. After some testing on different systems, I realized my problem only occurs on AMD cards, not on Nvidia, and I'm leaning towards this being a driver bug.
I've written a minimal adaption of the triangle demo from the Vulkan SDK to replicate the problem. The vs project can be downloaded here.
I've marked all of my changes in the source code with "// S3TC". The code for loading and initializing the image is located in "demo_prepare_texture_image" (tri.c).
The image I've used for testing is a DXT1/BC1 compressed image. This is the result on a Nvidia card (Which is what it's supposed to look like):
This is the result on an AMD card:
Uncompressed images work fine on either hardware.
My graphics card is an AMD R9 280, I have the latest (3/21/2016) Vulkan drivers installed, and I'm on Windows 10 Pro N x64.
I'm using the Vulkan SDK 188.8.131.52.
I've tested it on 4 different systems (2x AMD, 2x Nvidia), same result every time.