V-REP ( http://www.v-rep.eu ) is a powerful robot simulator with following features:

- 2 physics engines (ODE & Bullet)
- Full forward/inverse kinematics calculation module that can handle any type of mechanism (can work hand-in-hand with the physics engine)
- Very realistic proximity sensors (minimum distance calculation within a detection volume)
- Vision sensors with built-in image processing
- Collision detection module
- Very fast minimum mesh-mesh calculation module
- Path planning module (holonomic path planning in 2-6 dimensions + non-holonomic path planning for car-like vehicles)
- Scripting & distributed control: control scripts (Lua), threaded or non-threaded can be attached to every object in the scene
- Support for plugins
- More than 300 well documented API functions
- Simulation of dynamic particles
- Simulation of surface cutting operations
- Custom user interfaces with integrated edit mode
- Graphing of data (time graphs, x/y graphs, and 3D curves)
- CAD data import/export: dxf, obj, 3ds & stl
- Model browser with drag-n-drop, also during simulation
- Intuitive scene hierarchy display
- Free configurable scene views (cameras, graphs, vision sensor outputs)
- Integrated shape edit modes, with semi-automatic primitive shape extraction method
- Multilevel undo/redo
- Simulation of paint, welding seams, etc.
- etc.

Students can use V-REP for free. The downloadable version can be found here: http://www.v-rep.eu

Click here to view the iotd

Very cool, shall have to give this a whirl over the vacation. Do you include noise models for sensors?

The sensor models are ideal. You can however attach a script to the sensor, and that script will be in charge of adding your particular noise model