Personally for Source Engine modeling I use a combination XSI mod tool, Blender, and Google Sketchup.
For textures I prefer Photoshop.
For Normal/Bump maps I love CrazyBump
As for best free alternatives:
Modeling you have XSI mod tool (exports directly to Source) and Blender.
Texturing you are better off with Gimp or Gimpshop if you want a different more Photoshop layout.
Normal/Bump maps go for the open source program “SSbump Generator” or “ShaderMap” (free version and a Pro version for $19.95US).
For converting the textures I use VTFEdit.
For compiling the models I use either GUIStudioMDL or Studiocompiler depending on the model and my mood at the time.
Lastly for tutorials try https://www.snarkpit.net/snarkpower/articles though you can find numerous really well done tutorials on youtube if you search “blender tutorial”, “xsi mod tutorial”, etc… For example here is a video tutorial on modeling for HL2 using Blender https://www.youtube.com/watch?v=9RTTSACe_eI .
Also https://developer.valvesoftware.com has tons of useful info that can help.
Hope this helps!