Unfortunately, the problem is not the importer - but Milkshape itself. Let me explain...
Milkshape was designed to model
relatively low poly models for games. Now this means that if you have too many polies on a model - then the program will crash. I've noticed that I can get about 10,000 in - but nothing more. You'll probably find this with a lot of other formats as well. .lwo is Lightwaves native file format.
Newtek's Lightwave is, in my opinion, the counterpart to 3ds max. Both are designed to be generic high poly software packages. Now I've heard reports of Lightwave holding up to
three million polies in a scene and still being just about usable. Obviously it depends on your PC spec's, but Milkshape just can't handle the amount of data its trying to import.
As for programs that will import .lwo - Lightwave for a start. I think that Blender has a plugin; and I seem to remember reading about a plugin for Max that was available to buy. What exactly do you want the model for? A straight conversion would be impossible -if the poly count causes Milkshape to crash then A2's engine would splutter to a CTD if you had more than three on screen.
If you're after poly reducing or texture grabbing - then try importing the model with Blender and breaking the model apart. If all else fails, I think that you can get a free trial of Lightwave on the Newtek site...
Hope that helped
Whoa...long post...