While it's not going to be iClone any time soon, the free software Mikumiku Dance appears to allow a fair amount of animation capability if your thing is making dancing 3D anime-style avatars. The software is originally Japanese, however an English release is available and several training videos, available at the same link, have also been subtitled in English. The software incorporates the Bullet physics library, presumably for the cloth and hair simulation on some of the models.
Other potentially useful sites:
Miku miku dance wiki
Miku miku beat
When you combine the software with live camera tracking and compositing software, you can end up with results like this video: