http://sauerbraten.org/
With the new release (called CTF edition, which is a great old school FPS too btw) the Cube2/Sauerbraten engine has finally integrated everything that its critics have always said it lacks.
Now there is full .md5 and normal/spec etc support for playermodels just to name a prominent example (you can download a .blend of the main new playermodel as an example how to set up things in the wiki :
http://cube.wikispaces.com/Mr+Fixit ).
But there is much more... I honestly can't think of a single thing missing except for full physics integration, which is for most games overkill anyways (but correct me if I am wrong).
Oh and did I mention that the source code is available under an extremely liberal license (which does allow closed source commercial games), and that multiplayer level editing is as fun as it has always been with this engine?
Ok I admit it... I am guilty of advertising it. But it really is that good
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Now, I'm not going to say "perfect." But I do think it might currently be the "best" game engine for indi developers. Especially since it now provides access to the source code for more in-depth mod development. Sure it has its setbacks, but it is a very good engine for getting into game modding with a minimum of frustration and expense.
Workaround is to bring into a package like Milkshape I guess, but that means skinning / rigging in there, not something I would like to add to a pipeline. I still think import needs a lot of work in the cube engine.
however I'd say many indie developers dont actually make quake like FPS, but other smaller games. Think of gazillion flash games (XBLA,Wii like). And albeit having a zero-cost engine (another one with similar liberal license is Irrlicht, which has an editor as well, though not cooperative map making), that wouldn't be a problem with many indie developers either who often are likely to invest a few bucks into low-cost engines (which there are plenty of at varying quality/ feature quantity...).
The market for "indie engines" is too big, to declare this "enhanced quake" like engine the winner.
All depends on what you look for... and as said indie, doesnt necessarily mean you must use "free" software. It's a plus. But knowing the kind of competition luxinia is in, it's not an easy undertaking and I feel that sauerbraten is too much quake, feels a bit traditional (nevertheless does that very well).
Anyway next to irrlicht sauerbraten always felt very solid and not so bloated/complex as other free engines (ogre3d,crystalspace). It seeemd to be very focused on what you can make with it (which can be seen as pro or con).
You could also just rig and everything in max/maya, export to .smd format (there are working exporters for it), import the .smds in MilkShape and then export to .md5. The .smd format keeps smoothing intact and supports animations.
http://www.modwiki.net/wiki/MD5_(file_format)
http://scripts.zbufferstudios.com/
@Crazybutcher: Sauerbraten doesn't use bsp at all, but a really neat octree system (but you probably now that), but yeah currently is is more aimed at FPS and 3rd person action games.
But that is a huge market, and Sauerbraten definitly has the lowest entry barrier of all engines available for that (which is especially good for people who are primarily artists that want to make a indi game, which is why I posted it here on Polycount).
It is important for anyone interested in Sauerbraten to understand that it is very much intended for fast FPS development. If you want to populate a quick-and-dirty Quake-style game with art assets, its what you are looking for. Otherwise, it would probably be best to explore other options.
Just as a matter of note, Sauerbraten does still support the .md3 format if you don't like the .md5 format. I was under the imression that the .md5 format had better support for animation than the .md3 format. I'm pretty sure that it also supports the .md2 format, although I would personally never want to step that far backwards. The fact that it now supports normal-mapped characters also makes it a good engine for showcasing your work in-game quickly. Given how easy it is to construct levels quickly, it might be a good idea to download it and construct your own personal "museum" level for showing off your character models in action.
Also, if anyone is interested in simple flash-style games, theres always....you know....Flash! Adobe has open-sourced the Flex 3 SDK. And by downloading that, you actually have the ability to program and compile your own Flash creations with nothing but a text editor. Flash even has its own drawing API, so you don't even need an image editor to program your own flash games. (although it can help) In addition, the next version of the flash player (version 10) is going to have GPU-supported 3D rendering, and several 3D classes included in Actionscript 3. Exciting times!