Well, I'm originally a graphic designer and I would always use Illustrator for all logos. Especially now with CS2 you have so many effects to use if you want a web-only or 'web 2' type logo. But yeah, Photoshop would also do for this purpose.
You could try Inkscape. It's an Open-Source vector image editor.
I haven't used it a whole lot because I don't do many logos and mainly used Photoshop for graphics work but if you're looking for free/open-source software then it may be the best option.
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