I’m one of those guys that believes in the old-school idea of text pad. That being said, I also like the functionality of color coding and a built-in FTP client. Dreamweaver offers this with their code view, but it’s a steep price for a glorified text pad.
I use Aptana Studio which offers a free community edition. It colors my code and lets me keep things nice and tidy. Also bundled is a built-in FTP client so that I can just save my file and it’s immediately sent to my server.
I happen to be a firm supporter of Notepad++, it’s slim and works wonders (especially with it’s plug-in support). I do agree with using other tools to help streamline the process though, mainly I use a mixture of open source and free software such as GIMP and Inkscape but I also like Color Schemer Studio, SmartFTP, MyLife Organized and SWiSHMax to cover some of the stuff which I need to take care of on a daily basis. If you are going to be hand coding your website design (like most people here will recommend) find yourself a decent text editor which has code functionality like syntax highlighting, there’s loads of them about from the simple (Notepad) to the extravagant (UltraEdit Studio), it really depends on what kind of functionality you need from it.
I like Komodo for it’s features, simple interface and plug-ins for extending functionality. Komodo supports a lot of programming languages and markups like Python, Ruby, PHP, XHTML, CSS and many others.