Yes, of course blitz can load animated 3DS, X or B3D. They don't use the MD2 Command Set, they use the standard Animation command set, such as Animate. You have to use LoadAnimMesh.
Personally I'd use any free Modeler (3dlinks.com), Lithunwrap 1.3 to set the UVs and CharacterFX to animate. This is a cheap solution too, but the Animation Part is more userfriendliy than Milkshape IMHO. Tho I got both, Milkshape and CharacterFX. Milkshape also has those good Game-Format Conversion Abilities.
Personally I'd use any free Modeler (3dlinks.com), Lithunwrap 1.3 to set the UVs and CharacterFX to animate. This is a cheap solution too, but the Animation Part is more userfriendliy than Milkshape IMHO. Tho I got both, Milkshape and CharacterFX. Milkshape also has those good Game-Format Conversion Abilities.