Suggested Modelling Tools
Blender A free, powerful, cross platform open source modeling suite. To export md3´s you will need Python 2.4 installed and these python scripts (if link remains broken mirrored by geartrooper : blendermd3.zip). Blender´s md2 script is a bit broken unfortunately, you will need to export your md2 as an .obj from blender, import it into Misfit, export as md2, import it to q2modeller, then export it as md2 once again from there.
Milkshape3D A low cost, simple low polygon modeller for Windows, exports md2 and md3 fine. Does not support vertex weights. Fine for everything exept characters (due to no vertex weighting animation might be hard to do).
Q2Modeller Native tool to model md2s for windows. Can be emulated easily on Linux too. A bit aged by now, but can be handy to make custom vweaps from existing vweaps. Also used as a "clean up" for incorrect md2s you might encounter using other programs.
Misfit Model 3D A free cross platform 3D modeling program that imports md2 and animations. Misfit supports bone animation and conversion to vertex animations. After exporting the md2 load it up and export as md2 again in q2modeller to have the proper headers for your file.