You shouldn't have to "prepare" a texture for lightmass. If your texture source was jpg converted to a TGA or something like that then you risk posterization. Tweaking your lightmass settings and setting your lightmap resolution should keep it looking nice. Something is wrong with your lightmap settings, your lightmass settings or you are pulling your textures from a low quality source. Lightmass itself does not make your textures look bad if everything is configured properly and yes, build times are much much longer with lightmass enabled.
Edit: Configuring your lights' settings is also going to make a huge difference. Falloff, radius and brightness need to be set a little different when using lightmass, especially indoors.
Edit: Configuring your lights' settings is also going to make a huge difference. Falloff, radius and brightness need to be set a little different when using lightmass, especially indoors.