milkshapes fine, I used to just use it for all of mine, and just used lithunwrap for the purpose of taking screenshots of the uv map, and while lithunwrap is better then milkshape interms of unwrapping, when you save it back as a .ms3d file it loses all the smoothing groups. But just recently found out you can keep your smoothing groups by exporting as a .luv from lithunwrap, and import it in milkshape, so you can texture map it without losing the smoothing groups... that is if you did smoothing groups.
So currently how I do mine, first I use a plad texture for unwrapping uniformally, or just use a checker board style texture, then I seperate the model into various grouping to make texturing easier, also cause you just have one material per group. Then select the group I want to unwrap, invert selection and hide all, then just select the faces of it I want to remap and put them in various corners in the texture coordinator. Then I'll open it up in lithunwrap and use say planar unwrap or any of it's unwrapping tequniques. Once done export it as a .luv, then import that into your model in milkshape, and check how stretched the squares are in your template texture. The less stretched, the better. One bit of advice for unwrapping in milkshape though, select all, and unweld, then when your done select all and weld, trust me, this will make it easier cause when you hide the faces from other groups, it will also hide vertexs shared by more then one group, this prevents the hiding of vertexs you want.
For actually making the texture, I'll take a black and white pic of the uv map in lithunwrap, and then skin over that in photoshop.
Here's a pic of a ship I'm currently working on
This is the completed model, and the uv wrapping is already done, and am currently making the texture. The back wings texture is completed (going to add some decals later), but have to finish the edging of it. All the plad squares are the temp texture used for the unwrapping process. The front engines which have lines over it I'm actually using the uvmap pic from lithunwrap as a texture layer while I make the skin for the front engines.
This is just how I am currently doing mine, but it works fairly well. Albeit I spend about 4x as long smoothing, unwrapping, and making the texture then it took me to make the model.