My favorite level editor has to be from the Trackmania series. Well, at least when it comes to simple level editors, because this one is very simple.
Trackmania is a racing title as you would expect, and majority of the game is community supported with custom tracks anyone can make, and the mechanics of the game make it simpler: to win a race, all you have to do is pass through all checkpoints (in any order) and the finish. There is no out-of-bounds or wrong way, it's just passing the checkpoints and finish.
Best of all, the level creation is done with blocks. The track pieces are in blocks and do not have to connect at all if you really don't want them to. (However, there are certain blocks that have to be paired with certain blocks to connect them), and it is in a full 3D space that you can work with. The only criteria is that you have at least one checkpoint, a start, a finish, and you can complete the challenge yourself. It was simple and easy to create beautiful maps, especially when you got into the realm of the script editor.
It was a really simple editor, in which you could assign blocks (by clicking on them) to do certain things when the car rolled over them, such as making text appear or maybe changing the camera angle for a dramatic effect. It was simple, but it worked beautifully once you mastered it.