I've been working with Blender for a while now so I wanted to talk about the creation of models for UDK.
First of all, Blender is a free, open-source 3D modeling application that can be acquired at Blender.org.
There's several versions of Blender available, the stable version (the one Im using) is 2.49b and there's a new alpha version (currently 2.56) with new features such as particle simulations and a more advanced sclupting brushes.
That said, I dont quite like the new version just yet, it's nicer looking yes, but I've seen many people with issues exporting files and most of the new features are not really things that I personally need to use (also, most tutorials are made for previous versions).
If you are looking to learn how to use it, there's tons of great video tutorials at blenderunderground.com
If you are planning on making skeletal meshes (either characters or weapons), you'll need to install the psk/psa export plugin found here.
It works really well, any animations you make will be exported into the same .psa file (remember to change the name of the animtion from the default "Action" to something else).
The only real issue with this is smoothing groups, which are handled differently that in other tools like 3D Max or Maya. Here's a rundown of how it works, and the possible solutions link (I strongly suggest you read this).
The method Im using is basically splitting the mesh into the smoothing groups I need (using the Y key) and then rezise each one to 0.999.
It's a long and annoying process but it prevents UDK from merging models back together and in my experience there are no visible seams on that scale.
The result is exaclty the same that you would get with Max, so it's all good.
For static meshes, there's also an ASE exporter plugin but it sucks, just export your mesh as an OBJ and make the smoothing groups in Max or some other modeling tool (sorry, I guess you were expeting a better comment for this one!).
Finally, a few general random tips:
-When unwrapping a model remember to set the UV method "conformal" instead of "angle based" (default setting, tends to distort the UVs), you can also set if you want each UV island to be separate from each other, which might make texturing easier.
-You can grab, split, merge and resize faces or edges in the UV editor. This is helpfull to fix texture stretching and making sure you have a uniform UV distribution.
-Once a mesh is unwrapped, any face you duplicate will have the same UVs, which is useful to save texture space in symmetrical meshes.
-You can edit the mesh in any way you want after rigging. Any new geometry you add will need to be weight painted.
-The "mix" brush in the weight painting tool is godlike, very useful for cleaning messy areas and reducing texture stretching when a mesh is affected by bone movement.
-When rigging, if two bones have 100% control of the same area it will bend in a L shape, the smoother the weight painting is the smoother the resulting deformation will be.
So...yeah, feel free to ask if you want to know something.