It has been a while since I used it but Blender is the biggest and best free and open source modeling/animation. You can do *anything with it pretty much - well taking over the world might be challenging ;) but anything less than that can be done. It does take a lot of learning if you don't have any 3d modeling knowledge. I personally quite like the UI but some people have complained about it being non-intuitive. There are many great learning resources online - the official manual is pretty shiny too.
There are also many available models/animations that you can download for free - and if do to the vast array of importers you go for also download quite a few game mods that you can import to have a prebuilt skeleton, model and animations.
Full animation and timing and interaction with other objects is supported (though not exactly simple).
(minor note: I have been fairly involved with a FOSS 3rd party blender script projectforproject for TES IV Oblivion model/animation import/export - though I haven't actually done anything there for a couple years. Also IIRC I had one tinsy fix checked into the blender source as well.)