try smoothing all faces, then smooth and/or flatshading all of your facesAnimations don't forget up for me like this.
Has nothing to do with animations, the normals are just pointing in the wrong directions. No idea how to fix that in Milkshape though.
Exporting in Blender is a major pain in the ass, though, and I'd have to animate in an outdated version of it which loving sucks.