you need a 3d modelling program to make scrath models, like milkshape 3d, gmax, etc. Howver, you can model-EDIT already existing models, for example, the ones in the wc3 mpq, or the ones found here (must ask the author for permission and give credits where they are due).
For skins, you can use already existing skins(textures), from here or the wc3 mpq, it's difficult to understand... i will summarize it for you for the sake of efficiency. You can UV map a model to use any texture you want, for example, my texture is this text wall, i can make it so a Face of my Mesh has any word i want it to have, the texture on the Face(or a whole mesh) will look blurry and bad depending on the quality of the texture, or how far said Face(or mesh) extends.
hope I helped.