When we refer to "shading", we don't mean shadows only, we mean both - shadows and highlights.
"To shade a drawing means to add the lights and darks."
"Shading is a technique used in art to represent light and shade by varying the color and intensity of the medium being used."
Well, model wise, I'm not sure, currently it's mdx. Because that's what I know, but I did download 3DS Max not to long ago and figured I'd try to learn using that tool. As for what filetype we eventually stick with depends entirely on the engine we decide on.
As for the pony. I'll PM that to you later. Also, sent the knight to Nightmare as he was interesting in helping as well. So I'll see how that goes. Whatever the result, I'll send it to you as well to have a crack at it also. :D