I''m familiar with Direct Draw, but I have no experience in Direct 3D programming at all (or any 3D programming for that matter). Anyway, my question is, if I want to import 3D model, does it have to be in .X format? Thanks in advance.

You can import any file you want, provided that you know how to parse it and place the relavant information (vertices, texture coordinates, normals, etc.) into the corresponding directx structures, but if you want microsoft to do it for you, then the X file is the only format natively supported. There a plenty of tutorials and books that cover loading of milkshape files though. I am sure you can find information about other formats as well if you need.