Free:
Magos Model Editor(tools section)
MdlVis(XGM.ru)
Oinkerwinkle(google it, he's got a whole set)
GMax(more for creating static objects)
Warcraft 3 Art Tools(tools section)
And, um...Notepad can edit .mdl.
Costs:
Milkshape 3D(costs a small amount, not as advanced as 3DS Max)
3DS Max(costs alot)