In 2008 a buddy of mine and I started the story line for Hath.
After playing FO3 I have decided that the Gamebryo engine would be perfect for our game.

I am not in the game industry and fully understand that the chances of my game being published are very slim but will not let this stop me from creating a demo.

There are a few features that the full game will have that FO3 does not.
1. Game play revolves around 4 player characters. The player can switch between characters depending on the skills needed.
I figure it should not be too difficult to have 4 companions in which 1 is always disabled. When you switch you enable your current companion and update all states and equipment. Then copy all stats of the companion to wish to transfer to and disable that companion.

2. All 4 characters and enemies are humanimals (half human half animal). So I will need the ability to modify animalistic faces. Not 100% sure how this will work as far as customizing facial features which will need to be done for some quest. I figure features such as horns, ears and snouts may need to be an overlay and modified separably. The customization will also need to be available to the body as well seeing as you will have characters that are bears, birds, lizards and cats. Also some enemies will be chimera (3 or more animals).

3. Maps are more dynamic. I will need a script that can add random landscape features to keep the player guessing.

The question and input I am asking for here are:
Legal, can I make this much modification to FO3? I plan of changing out as much as possible. New weapons, items, characters, landscaping... everything. Some things may be kept. Why spend time creating books, rocks and simply object when they are already in FO3.

What other tools do you suggest to use for this much modification? I have basic knowledge of LightWave and 3DS max. I'm not great at character modeling and will likely need help from others to create and rig enemies and characters.

With the rigging how does Gamebryo handle bones or is there another method of working character animation inside the game engine.

Any amount of help or advice will be greatly appreciated. My end goal is to create a demo so I have something worth giving to Bethesda to help finish a salable product. When the demo is finished it will be put out for free as a mod for FO3.

First let me say I like your style ... It reminds me of all the things people use to come up with via the campaign editor for Star Craft.
Like playing a D&D game complete with a dungeon master controlling a Terran science vessel flying around to eyeball the situation and spawn mobs when ever they wanted. My personal favorite beyond the intended game play.

Next I would change your use of the word "Game Demo" to "Modification of Fallout 3"
Because we need to show a little respect for the devs of the game AND the tool they gave us to manipulate its mechanics.

After that you might look at what the Modder of "Project Beauty" did to manipulate the textures for the Actors. Although they might not be to happy about it. But hey , its freeware and what you do on your comp is your business.

That aside , let me say youve inspired me to find "OUT the BOX" Ideas for how to change the canvas and paint brush Bethesda provided us with.

Wooooo hoooooo I am very glad I have inspired you My demo/mod will in fact need to be a mod. No matter how much I change the graphics, functions and game play you will still need to have FO3 to make it work. I'm just putting a new house on the old foundation.

Thanks I will check out "Project Beauty" and see what they have done. Any thoughts on adding body modifications in a "showplasticsurgeonmenu" like menu. The full body manipulation has its part in the game play.

Speaking of out of the box . I read a post on this board earlier that a player used the water texture to create a reflective mirror. I would love to see a large mirror maze. Complete with some baddies in Slasher Masks. Maybe even turning off the local map on the pipboy if not then just disabling it. Nice little challenge. And if you get through it..... "Explorer Perk" and a great big muuuuuuuu hahahahaha