I use PhotoShop, but anything that can save an 8-bit BMP (at 256x256) should work. I hear good things about PaintShopPro, also.
If your program can handle layers, that will make your life easier.
If you do have PhotoShop, I can send a layered example of one skin I've done so you can get a feel for it.
...and with AH2 coming out soon, the skin MAKING process will stay the same... it just may be a different layout and resolution from the AH1 skins. What you learn now will transfer.
