Blender
www.blender.org is very easy to use once you get used to it, and in my opinion the best modeling software out of the list posted by Gamer X. I own 3D Game Studio, but it's really the engine that you pay for. The model editor and world editor (level editor) that comes with it is very limited. Milkshape (to my knowledge) has NO hotkeys...meaning it takes a long time to switch from the select tool, to the scale tool, and etc.
Blender's hotkeys allows you to press S for scale, G for grab, and etc. It's what I use to make levels in Game Studio, and every other model in my games. I use it to make the models for FPSC as well. You can texture map, animate, everything you need to do. The only issue Blender has is with exporting .X files. So what I do wehn I'm making an FPSC model, is export my models from Blender into Milkshape as an OBJ file when I'm done with them, and then in Milkshape export them as a .X file.
You should spend some more time with Blender. Here's a link to Blender's hotkeys, and several tutorials to help you. And if you want to see the quality models Blender can make, just google Blender
http://en.wikibooks.org/wiki/Blender_3D:_Noob_to_Pro
Hotkeys:
http://en.wikibooks.org/wiki/Blender_3D:_Noob_to_Pro/Edit_Mode_HotKeys_Review
-Kravenwolf
Success is not final--failure is not eternal.
