i highly recommend blender (www.blender.org) because it is free, really good, and ventilator wrote a great exportor that handles bones and vertex animation, textures, etc.

its a lil tricky to learn, but if u use the online documentation and tutorials u'll be pro in no time. i use it for models and levels and terrains (i use models for all elements of my levels coz i find them either to use). ventilator's exporter means there's no need for MED at all.

julz