how was the model created? the blender md2 exporter has a malfunction, try to convert the model to another file first.
if the model wasn't created in Blender, try to load it in Blender first and then export it to *mdl using ventilators script (search the WIKI). this works in most cases.

[edit] other question: is your 3d view port set to the correct display dll and to textured view, not gouraud shading?