If you really want to go for high quality 3D models, I'd have to recommend 3DS Max. It's a bit tricky to obtain a license that lasts (*ahem), but Autodesk does offer temporary free licenses to students with a .edu email address.
Cheap alternatives? I heard of Milkshape earlier, which is free to try and cheap to buy, but no one talks about it anymore, and it doesn't seem to be something people look to for NL modeling. I wouldn't know as I never tried it.
And the free. The two most common are Anim8or and Blender. Anim8or is somewhat easy to learn, but it is VERY restricting in many aspects. There are no boolean operations (i.e. modeling a pipe by using a cylinder, then using another cylinder shaped to fill in the inside of the pipe and applying boolean subtraction) supported, and more urgently, Anim8or does not support numerous features of the .3ds file format. .png textures are not supported, so you cannot use transparency to reduce polygons, model vegetation, etc. Anim8or also does not export environment maps, which, in layman terms, means you cannot make your 3D objects look nice and shiny like Xbox 360 games.
Blender... I didn't bother figuring it out past importing objects (which I couldn't get their textures to display) and rotating a 3D view on one axis. I don't know if it is ideal for NL, but I would definitely say that it is more likely to be good for NL than Anim8or is.
Conclusion: If you're serious about good 3D modeling, get 3D Studio Max if you can. Otherwise, try Blender. I don't even know why the hell I brought up Milkshape.
If 3D modeling doesn't interest you that much (though it is immensly useful for numerous applications outside of NL; great for creating good art/renders that one would otherwise be restricted to Photoshop for), then I guess Anim8or, Sketchup, or even Object Creator could fit the bill, but only if you plan on making the most simple of 3D objects for NL. The power in 3DS Max is not just what you can make, it is the ability to make it better; to do more with fewer polygons which mean faster framerates in NL.