Broadly, you would need to:
Convert the model from one of its currently supported formats to the MDL/MDX format supported by the game. This can be done in a 3D modeling program by importing the model together with one of the existing game models and making some adjustments.
Change the item's item type to something else (e.g. Long Sword) by modifying the BaseItem field in the item UTI file.
Here is a list of common modding tools. It isn't complete, but it's a good start. Additionally, you would need Blender, 3ds Max, or Gmax for the first part.