One of the best modeling app you're going to find is Wings 3D. It's free and you can get it at
http://www.wings3d.com/You can get a commercial app, called Silo, that is like Wings except with more features and will probably have animation one day. It's fantastic:
http://www.nevercenter.com/For just a little bit more you can get Caligari's Gamespace. There's also a free lite version:
http://www.caligari.com/gamespace/There's also the free version(not for commercial use) of 3D MAX at
http://www4.discreet.com/gmax/Milkshape is a good moddeler for low poly models but the industry is moving forward with very high definition models. Just look at the UNREAL 3 engine to see what I mean.
Games with low poly models, and game creators like 3D GAMESTUDIO always look flat, angular and lack lustre.
The models in Unreal 3 aren't really that high poly. They have a normalmap shader assigned which makes a low poly model look much higher than it really is. You have to create both a low and high poly version and create a normalmap off of the high one. Next time you see a screenshot from Doom III, look at the model's profile. You'll notice all of them are very low poly. Unreal 3's models are pretty high for lowpoly, but then again that engine isn't going to hit the market for a couple years so standards will have risen by then anyway. IMHO, a well made low poly model will always look better than any old claylooking normalmapped one. If a lowpoly model looks flat, angular(which there's nothing wrong with really), and lackluster then this is because it is poorly constructed and poorly lit.