Doing an RPG isn't a "bigger project"...it's a really really big project. That said, on to your question: As you might have noticed, i'm working on this:
http://www.youtube.com/watch?v=oew62wECxqY...so at least i can tell what i used to create what's already there (which is still not even close to completition). I used Terragen for the outside world, a basic text editor for the dungeons and xml for the object placement. I'm in no way advocating that this is the best way, it's just my way. I've created the terrain in Terragen, reduced the polygon count using the approach described at
http://www.jpct.net/wiki/index.php/Reducing_high-poly_models and exported it as OBJ. The terrain's texturing is done via a splat map and a custom shader that blends grass, rock, dirt and sand textures.
Trees, bushes, flowers and rocks are placed at random and saved. Houses, ruins, chest and stuff are described in a xml file that defines x and z position. They are then "dropped" onto the terrain and (if the xml says so), the terrain will be flattened by some code so that they don't sink in are fly above the terrain.
The dungeons are simple ascii maps and are rendered by using a set of 3d tiles. That makes them look a little (or very) old school, but there's no faster way of building levels than that IMHO.
I choosed this way, because my time is limited and my talents when it comes to 3d modelling are limited too.
I hope this helps somehow.
There might be other ways like using this tool:
http://www.jpct.net/forum2/index.php/topic,2346.0.html or creating your own in game editor (which isn't very complicated either).