Another reasonably cheap (about $200 I think) software that I use daily is Globalmapper. It is so much easier for day to day data tasks like georeferencing, import/export conversions, reprojections, etc. than Arc9+. This program gobbles up dlg/drg/dem (usgs data) way easier the any ESRI product, which are constantly making you covert free data into their proprietery formats (shp/gdb/e00/grid/etc.) This fact alone makes this one a winner.
I also use Leveller (about $100) as a easy height field/dem editor. This also has loads of options for importing data and exporting in a different format. A number of different filters can perform varying alterations to dems. The program is not inherently georeferenced, so care needs to be taken if to be used with other data later. I comes with a light weight render engine that is suitable for decent previews. Honestly, you can probably do most of the filter functions in photoshop, but having them all bundled together and geared towards dems in once place makes me use this tool a lot.
As fer work flow, if hillshading is required, I bounce back and forth between Leveller and VNS for a while and then do final rendered touch ups in Photoshop. On the vector side, it's usually a short sint in both Globalmapper and Arc for complilation, and then into AI for some preliminary design (line weights/colors) and labeling, then switch all vectors to raster, and compile with hillshade in Photoshop, where I do any effects to bring it all together.
Using ArcGIS ...
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