for modeling and animation, I'd go with blender, its free, has a great exporter to the mdl7 file type and has features the closest to a high end modeling app.

for textures there are a couple of options. I go with gimp but I know another one that many people use is paint.net. you'd also want to get a good resource for base textures. One I really like is imageafter.com it is nice for both base textures and reference pics.