I use vi in hex mode and edit the bits by hand.
Ok, fine.
Illustrator for panel and rivet lines and anything else that looks mechanical
Photoshop for paint, dirt, shadows, weathering, and anything else that needs depth or color
My F4U-1 template (from which I've never sent a submission) has over 200 layers to give you some idea just how anal I am about separation. Originally I started with Gimp, but my skill set grew up with Photoshop so in the end I stuck with it. I've also not found a tool comparable to Illustrator to use alongside it.
Right now I'm forcing myself not to do anything with skins...I just don't have that much time to pour on what is, ultimately, just a bit of eye candy. Otherwise I'd be rebuilding my La5 templates and finishing the F4U template and...and...and...and not getting any work done on solid state cooling systems, electronic controls, woodwork, house remodeling, or the other things I need to do.