I use a lot of different tools for editing my models.
I use WoW Model Viewer for background assets (Such as furniture) and non-player models. However, it hasn’t been updated in a long while and has glitches with the Pandaren females. I’m not sure if it’ll ever be updated. It also contains particle effects, but I’m not sure if you can export them as transparent.
(YOU NEED TO HAVE WOW INSTALLED TO USE THIS!!!)
You can also use it to make neat gifs!
More recently, if you want to use WoD models, you can use the Profiler on WoWhead. This is used to export already created in-game models for dressing up and animation viewing.
Now, with WoW Model Viewer, I export the file very big as an image, with a background of a vastly different color.
With Profiler, I double click the window the character is in to blow it up with the preferred animation, and screenshot until they’re in the desired pose.
At this point, I edit the faces and tweak how they look, for example:
In this particular edit, I used Paint Tool Sai. I smoothed over his wrinkles first with an airbrush tool, along with adding the freckles and darkening the corners of his mouth to add a smile.
I exported the goggle model from WMV, manually cut it out, and positioned it over Ziti’s hair curl, before drawing the connecting band across it. I tweaked his hair by cutting it and positioning it downwards to cover his forehead.
I rounded the edges of his face to create a youthful look, using the airbrush tool as my best friend. I also did this with his nose, obscuring one of the nostrils and smoothing the other, while rounding the nose more and adding a stark shadow to the bridge of it.
Do not use a hue tool to change the eye color. Manually paint over it with an airbrush tool while checking the opacity to make sure it looks similar to the original eye.
After this is done, I cut the character out by either going to Paint.NET and using the lasso tool (Usually if it’s done in WMV. The above image was taken from the Profiler, so I had to use SAI’s eraser tool to make it transparent. Very long and tedious.)
I drag them onto an in-game screenshot, and either add a filter or add shadows in all the right places to make the scene look like they aren’t simply pasted on.
And there you go! A beautiful new edit. There’s other things you can do, like chopping off limbs and pasting them to create new poses, or rigging the models in Blender, but these are the basics and they’re what I use for now.
I’m more than happy to help you hands-on if you need anything in particular!