I’ve just started using a great XML editor: Liquid XML Studio. I used it when creating some XSDs the other day. It’s really easy to use, and has a great graphical interface too.
The thing I really really like is the feature to generate an instance of the schema. The only other tool I’m aware of that does this is the BizTalk schema editor – but that’s a bit more of a heavyweight tool than I usually need!
It also has Visual Studio integration (with the visual editor), XPath expression builder, documentation generation and a web service browser. It’s not cheap, but there is a free feature limited Community Edition. There’s also the high end Developer Edition that adds a load of muscle for people working with more complex schemas, such as the OASIS schemas.