Many will recommend Blender:
www.blender3d.orgSome will recommend k3D, tho I have not used this program & I dont know if there is a .md3 export script for it.
Blender has a .md3 export script(check the wiki for that), tho it is a very daunting program to start with. So unless you have prior 3D modelling experience, don't expect to be making amazingly cool models within the next few weeks.
