I just posted a somewhat lengthy article on my MSDN blog covering Avalon and 3D graphics. I got a little bored yesterday and this is what happens. In a nutshell, I created a mesh exporter for MilkShape that will output the mesh in XAML format that you can then load using Avalon.
http://blogs.msdn.com/markhsch/archive/2005/08/24/455791.aspx