Ars Magica
LinksPoser 4 from Curious Labs is a 3D character animation package, which also allows you to easily modify the facial features of a character. Although the included models do not exactly support RPG style portraits, there is a lot of free material available for Poser on the net (see e.g. Renderosity). A neat thing about Poser is that while normal rendering often does not seem really lifelike, you can use a sketch style renderer that produces sketch-like drawings quite suitable for character portraits. It's quite pricey (around $200, less if you shop around), though.
Note that the Poser 4 demo does not include the same possibilities for facial feature modification, since the included model does not have the necessary morphs. Also, for professional results you would need the more advanced Michael 2 and Victoria 2 models from DaZ3D.