well for one Simple he hasn't mentioned at all what software he is using, but my guess after another post it would be Max ... so why the hell would he want to stoop to using CharacterFX?
How he animates it upto him, and it appears that he doesn't even have the first clue (nor do you though, not that you ever did) ... so perhaps if he's actually explain better what he is using and what he actually wants to achieve he could get some real help.
as for animating in Milkshape its simple... try this and you'll see how simple it is (just takes an ounce of skill to actually achieve something, something Simple lacks which is why he needs so many programs just to achieve what most people can in actual programs).
Create a Cylinder doesn't matter how many sides as long as it has 3 stacks and make it slightly tall. Now click on joints and click from top to bottom at each of the stack - so you should end up with 3 joints 1 at the top, 1 in the centre and 1 at the bottom.
now goto the joints tab, click on joint1 and it should highlight in the veiws - then goto the model tab and in vertex selection select the entire top stack of vertex, go back to the joints tab and click on 'assign'.
click on joint2 and this time select the middle stack in the same mannor then assign that, finally repeat for the bottom stack.
now you have an assigned animatable model, click on select and this time use joint mode - click on the 'animate' button at the bottom move/rotate the joints about to however you want them and once your happy press 'ctrl-k' ... to add another keyframe notice there is a slider at the bottom, that is on the current frame just move it to another frame and you can then set another keyframe.
If you move the slider without saving the keyframe you loose ALL movement within that frame you did. There are 2 numbers after this slider, first is the interpol speed (standard is 1.0), the second is the total number of frames available.
checkout the keyframe menu item as you can also copy/paste/delete keyframes with it which is useful for animation looping and such.
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