My main tools are :
- 3D Modeling: Milkshape3D (not free but cheap) - Low poly modeler with good level texturing tools and animation capabilities , though lately , for character animation I've exlusively been using Mixamo.
- Terrain : L3DT - Random terrain generation based on initial parameters but with sculpting and editing capabilities and heightmap import (basic version free - Pro version allows for bigger terrains) - you can save heightmap and generate terrain texture for usage in DBP later on.
lots of other features also. Texture blending not so straightforward - You may consider Tersculptv2 mentioned in latest posts here.
- Animation : Mixamo - upload .obj character in T or A pose , set skeleton joints, choose animation and download animated model in FBX format - you will need a converter from FBX to .x - best one for me has been Ultimate Unwrap 3D Pro (not free but cheap).
- Deep texturing and format converter: Ultimate Unwrap 3D Pro (not free but cheap). I mainly use it for converting fileformats - -namely FBX to x or viceversa. Best trouble free .x importer/exporter found so far. - Allows to blend all single FBX animations done with Mixamo in a single one and export to X
- 2D image editing : 1) Pixelformer - Allows BMP to PNG with alpha transparency conversion - And opacity tweaking for glass like textures - using layers you can blend solid color with semi-transparent areas in png format ( like windows with frames )
2) GIMP
Others free that I know of are:
- Blender : Totally comlpete and professional - horrible interface till version 2.8 but i haven't tried this last one yet. Seems to handle FBX and .x formats fine.
- Wings 3D
- Anim8or - Low Poly
- DeleD - Low poly but with added bonus of Lightmapping capabilities
You might want to research a bit on all of theese and watch some YT tutorials
Cheers