Another plus for Milkshape is ease of use. I was able to start modeling with it right away. Never read a tutorial one. Very logical and easy to figure out.
I forgot about gmax.
Virtually the same as studiomax, but free. It's limited on the file formats that it'll work with. Won't import/export .mod, but does support other games. I have imported .3ds into it (will also do .obj) and exported to .m3d (Quake 3 format) and then into milkshape, which works fine. It'll do a lot more than Milkshape will.
http://www.turbosquid.com/gmaxIf you end up with a pgm. that won't export to the game format you want there are folks here that'll convert your models for you. I will, if you need.
Forgot about a paint pgm. too. You'll need one for texturing your models. There's always photoshop and paintshop pro, for commercial pgms. Most people use one of these, but they aren't free. Gimp is supposed to be a good free one. I've never used it, myself.
www.gimp.org Microsoft's, "Acrylic" is still available as a 6mos. trial and is gonna be a pretty highend paint product, when it's finally finished. If you're familiar, and comfortable, with M$ pgms. and their interfaces, you might want to try it out.
http://www.microsoft.com/products/expression/en/graphic_designer/default.aspx