using Blender

Can Blender be used to produce models that are loaded into a game?

Yep, many formats supported. But the interface is a bit wierd..

I heard that milkshape is realli good, though i haven't used it myself.

I know how to save images with the program, but for this I meant for 3D games.

yeah, you'll have to implement a 3d engine and a model loader, but it'll make the models.