I just wanted to thank Thomas for figuring this out and taking time to write such a detailed post about it. I can confirm that this method also works for me and report that I've now had success taking existing .MDL files into Poser and back with textures intact.

In order to make this work, I've had to modify some of Thomas' steps and add a few more, but the ability to use the Poser tools to animate these low-poly figures is well worth it to me. I'll just list my basic steps here and if anybody's interested, just reply to the post and I can supply more details, and I'll make the MED plug-in that I've written to accelerate the last stage of the process available.

1) Save the .MDL as a MDL5 file in MED, if it's not already MDL5.

2) Use the latest version of Milkshape (1.8.0) to import the MDL file. Re-pose the arms so that they are extended straight out from both sides of the body, like the default Poser poses.

3) Export the model from Milkshape as a .3DS file.

4) Import the .3DS file into Poser (Poser 5 is what I'm using). The figure should be textured correctly. In the Setup room, add a lo-res skeleton and fit it to your figure. Do the grouping of the triangles to the bones.

5) Animate to your hearts content and then do a multi-frame export as 3DS files.

6) In MED, do an Import Append Mesh from 3DS to bring in your first frame, then an Import Append Frames from 3DS to bring in the rest of the frames. The import appears not to work, but this is because the imported mesh and frame are tiny.

7) This is where the plugin comes in -- run my increaseSize plug-in and it will scale the contents of each frame to be about 130 times bigger. Zoom the camera back and you'll see your model. Save as MDL7 and you are good to go.

I'm trying to make the plug-in more friendly and more useful (like allowing the user the supply the scale factor instead of having it hard-coded at 130, etc.) but I don't know MFC and the plug-in is doing what I need at the moment, so I may not get to that for awhile. As I said, just respond if you want the plug-in or e-mail me michaelmccrickard@hotmail.com.

Thanks again to Thomas for all his efforts that made it possible for me to figure this out!