So I am assuming XSI is some 3D modeling program
Yes

However, you can get the free version of it, which the company released for mod-makers. It's a little more limited in features, obviously, but it still does a good job.
You can grab it
here. There are also some very nice video tutorials for it, and people on the forums can probably help you out some. I don't do any modeling, so that's where my help will have to end

Developer: know what it is but, just doesn't work, says it encountered a fatal error
Particle Forge: yep... doesn't work, says it has "encountered a problem and needs to close"
I saw the other thread where kryo was trying to help you make sure you have .net 2.0 running. I think the issue is something related to it. You mentioned a missing dll earlier, what was that about?
Edit: Did some digging, check out
this thread. Specifically, DANMAN's upload of the missing DLL that should fix it. Also, make sure you're running the mod tools from the same directory where your Sins of a Solar Empire.exe is.