This tutorial is for Blender 2.64. There's a high chance it won't work with other versions due to format changes.
Step 1 - Downloads:
Download blender: http://www.blender.org/download/get-blender/
- If you need 2.64: http://download.blender.org/release/Blender2.64/
Download an SMD exporter: http://code.google.com/p/blender-smd/
- Mirrored here: http://dplogin.com/files/tools/skm/io_smd_tools-1.5.2.zip
Download skelmod (SKM) converter: http://bfeared.com/library/quake/archive/quakedev/jalisko/index_files/skelmod.htm
- Mirrored here: http://dplogin.com/files/tools/skm/skmodel2.03.zip
Step 2 - Installation:
Install & open Blender - should be self explanatory.
Unzip the smd tools.
In blender, go to FIle -> User Preferences -> Addons -> Install Addon... and browse to the directory with the smd files you extracted.
Select io_smd_tools.py. It should display "Import-Export: SMD\DMX Tools". Check the box to the right of that to enable the plugin. Close the window.
Step 3 - Export:
Note: before exporting, you must have at least one bone assigned to the mesh, and you probably need to set up materials and UV coordinates, otherwise the SKM converter will likely fail. Also note that 1 unit in Quake 2 is really tiny, so you'll likely have to scale up your object about 10x's.
Go to File -> Export -> Source Engine (.smd, .vta, .dmx). I just selected the first option, which created a .smd with the same name as my mesh (Cube.smd).
If you don't see the export option, make sure it's enabled by going to File->User Preferences->Addons->Import-Export and checking "Import-Export: SMD\DMX Tools".
Step 4 - Convert:
The easiest way to do this is to extract skmodel.exe, run.bat, and model_definition.txt from the zip in step 1 into the directory with your skp file.
Change the "model" and "export" lines to the name you want the model to be.
Replace the "scene" lines with the name(s) of the smd(s) you exported from blender. You will probably just have one, unless you have multiple animations.
Double click run.bat.
If all goes well, you'll get a .skm, .skp, and .skin file. You don't need the .skin file. If you get errors, make sure you have a bone assigned to your mesh.
You may want to edit your run.bat to copy the skm and skp files into the appropriate paintball2 directories if you're frequently editing the same file.