As stated above, which solution is better for a game based on user generated content?
The simple solution (in-game editor) is great for gamers without experience in coding and etc. In this way every player could populate the game with content. But the content would be very limited.
The complex solution would allow the content to be with almost no limitation but casual gamers probably couldn't make hardly any content at all.
If both solutions are used, the quality behind the second solution would be more valuable than the first solution's quantity.
However, making a powerful in-game editor could even take more time and manpower than the actual game and every gamer would have to learn how to use the new complex tool, understand it, and master it if he or she wants to make quality content.
You would be able to make levels and objects for it as well as the player model itself.