In Modo 302 modeling program there is nice feature called polygon reducer. This feature will take your selected polygons and reducing them as much as you want. While its not perfect, its fine piece of feature for us ArmA modelers.

(following 1-3 parts are purely optional, gives you texture view Modo)
1) Open your p3d model in O2PE. Change *.paa textures to *.tga by using Tools → Mass Texture & Material Renaming… feature.

2) Save the p3d, preferrably to another filename so you have the original in safe.

3) Save your paa textures for this model into tga format (TexView2 does it). Place them into Modo texture dir (what ever that may be is up to you).
(parts 1-3 are completely optional, you do not need to do this for creating lower res LOD).

4) Open Synide's tool called p3dm2lxo and browse to your p3d file, then choose the preferred LOD you want to convert (that would be 1.0).

5) Open Modo 302, choose CTRL-O open file LWO and your just converted lwo file.

6) Save it immediately to LXO file with File → Save As… and then close it with CTRL-W.

7) Open the just saved lxo file. If the model is not in view, press A key to center it. Now you are ready to start making low res LOD.

8) Go to polygon mode with SPACE key, choose them by LMB clicking and then hide them with H key.

9) Use menu Select → All to select all polygons. Notice that it says shortcut CTRL-A there but it doesnt work. Also you could select all polygons by any other means, for example with mouse middle button pressed drag a circle around the whole model.

10) Choose Polygon tab from the vertical bar on left side.

11) Click Polygon Reduction tool button.

12) LMB click somewhere on the model and you see the Number field updated to how many polygons this model has.

13) Type the number of polygons you wish this model to have. Read more details below. Press enter and polygons are reduced. Depending on your computer performance and model details, it might take few seconds to calculate.

14) In Statistics window on right side, click the triangle next to Vertices, then click By Polygon. Now click the + sign on the name 0 (zero), ie first. You see many (or none, dunno) vertices selected, these are not connected to create polygons and you can/must delete them. Delete them simply by pressing DEL key. So Vertices → By Polygon → 0 and DEL, easy.

15) Choose File → Save As… and LightWave Object LWO format. Give filename to save your model.

16) Open Synide's lxo2p3dm tool, browse into your new saved lwo file. Notice that Synides tool wont interact with you at all, there is no progress bars, no nothing. Wait just a sec so it completely converts & saves the model.

17) Open the newly converted p3d file in O2PE, choose all CTRL-A and Recalculate Normals F5. Then Copy-Paste it with CTRL-C.

18) Open your real p3d model you wanted to reduce polys, make a new resolution LOD by RMB clicking the LODs(?) window, choose New and O2 automatically creates next available res LOD number. Double click on this number and paste there CTRL-V.

19) Open Tools → Mass Texture & Material Renaming… feature, click the “Default” texture (red color), then replace it with nothing and it gets removed. Now replace the textures which start with P:\ so the P:\ will get removed. Go through rvmats and the usual texturing stuff.

Done, you have now added new lower resolution LOD into your p3d model using Modo 302 and O2PE. Congratulations.

This is part of the Modo 302 help system (activate it using F1).

The Reduction tool works by iteratively removing edges from the mesh while trying to maintain as much of the original contouring as possible. There are three options to the tool: Number, Material Border Weight and Boundary Weight.

Number: When the tool is first activated this field will contain the total number of polygons in the currently visible mesh layer. Clicking and dragging will adjust this number in the tools property and in the mesh. Of course, you can also simply type in the exact number of polygons into the property field.

Material Border Weight: Determines how much emphasis should be given to using polygons to preserve the integrity and detail of the mesh along edges which define a boundary between materials groups.

Boundary Weight: Determines how much emphasis should be given to preserving the details around boundary areas of the mesh.