Wow! I am not much of an artist, but VoxelShop is really easy to use!
flux, definitely give us an idea of how we can import the file formats, because I'd love to be able to create Terasology objects using this tool! I did some quick searching but wasn't able to find anything that could convert between collada and md5 directly. My only hiccup in creating a "dog" (moose?, well, some kind of animal-eque thing) was I couldn't figure out how to deselect without saving, quitting, reloading. (escape/deselect button didn't do anything for me)
UPDATE: I looked into both the md5 model and our Terasology model for skeletal mesh (very similar to md5, unsurprisingly). It doesn't seem like it's trivial to convert from a DAE to an MD5 format. I'm not completely sure how you calculate the bone/joint weights. I did convert the DAE to an OBJ/MTL format, and then load it in, obviously losing the animation. That works although I just used a placeholder material file. The load fails for a standard VoxelShop model because we are unfortunately requiring texture coordinates for everything, even if the material doesn't provide any textures. The error-checking code can either be commented out (path of least resistance) or you can select all of the voxels in VoxelShop and apply a texture to them.
In the end, I think maybe it's more like a giant cow than a dog.....
Another VoxelShop feature request -- ability to make a fine-grained model out of a coarse-grained one. Basically make every voxel into a 2x2x2 set of voxels. So you get the rough shape right, double the size, then do more detailed work. Other magnifications, like 3x3x3, might also be nice, but might be out of place with the simple interface you currently have. But all in all, I just created a cool 3d model that I probably never would have attempted in something like Blender.