I know you can edit models with JUST the Galaxy editor without a Model Editor (if you don't believe me, look up "Uberlisk" at YouTube), so I'm wondering for my sequel campaign to Rising of the New Agent, I want to make Kheldrun (The Hydra hero) evolve into a more powerful Psionic Hydralisk. What I want to do is put an outline glow of light blue around his model, make his eyes flash light blue, and have him shoot Psionic Spines instead of normal Needle spines. Do you think all of this will be possible with the Galaxy Editor?
No, those were simply attachments (though the attachments themselves seemed to be units), not an entirely different model.
Custom models will still have to be imported from some model editing program such as 3ds max. However, I hear that Blizzard will be officially supporting 3d model conversions (i.e. .m3 <-> .3ds), although I haven't seen any citations of such from Blizzard themselves. Obviously Blizzard themselves is able to convert it, but who knows if it's going to be publicized.
If Blizzard really wants people to be making premium maps, though, it would seem only logical that Blizzard would support it. Often with WC3, even how long it's been out now, converting to .mdx causes some glitches.