Hi, Zombie/nVA!
I have just managed to create my very first model for UT.
I have made it with Milkshape3D (man, it's freeeee!!!!!)
Skeletal animation is sooo cool. It is simple, easy and quick. You can create a totally new model in hours (ok... it took me 3-4 days).
My only problem was, that I had to convert the model to Quake 2 format (md2), because converting to UT format with Crusher (a Quake 2 model viewer that can convert to Unreal) gave me a better .uc file than MilkShape3D.
Modelling, skinning and animating is a child's play with MilkShape3D!!!
The Quake 2 editor
(http://www.rmdsoftware.com/q2modeller/)
is also very useful tool!!!
There is a good tutorial over at
www.machinima.com/articles.shtml
3D Studio Max may be the best program for modelling, but these programs are free (or shareware), and are MUCH EASIER to use (I think...).