In January 2002, BIS' Marek Spanel announced that BIS would eventually release two tools to help mod makers create their own objects and worlds. One tool, Oxygen, is for 3D modeling. The second, Visitor, is for landscape editing. Oxygen is capable of importing 3DS MAX files, including texture mapping information.
So, if you're interested, go to BIS' Breathe site and download Oxygen for 3D modeling and Visitor for island making.
As an island making alternative, on June 7th, 2002, Project OFP Internals released their own terrain utility, WrpEdit. You can download it from Project OFP Internals or from one of the many OFP editing sites. You should find tutorials on these sites, describing in detail how to use WrpEdit. You'll also find a WrpEdit tutorial at Comrades in Arms (CIA).