I've tried DCRaw and UFRaw (free) and the RAW conversion utility in PSP 9 (not free).
Nikon Capture is better than both, but they both work.
The thing is, Nikon have been a wee bit unhelpful to us by encrypting some of their NEF data so that only NC can read it - logically then, NC will make the best job of processing NEFs. In addition, certain "bells and whistles" like the "Color Moire" reduction function are only found in NC (though I understand that other applications have developed alternatives).
A lot of users on Nikonians seem to be very happy with Adobe software + Adobe Camera Raw (ACR).
The reality is, "best" depends on what you're aiming for: if all you want to do is get your NEFs off the camera and convert them (doing all the proper post processing in Photoshop, PSP or whatever) then UFRaw - either stand-alone or as a plug-in for The Gimp - is fine, as is the RAW convertor in PSP 9.
I actually quite like Nikon Capture, even though it's slow on my machine, and it allows me to do what I need to do with the minimum of fuss (because it can read the encrypted White Balance information and whatnot - I don't have to muck about with a "best guess" from other software): but I'd manage without it - and The Gimp + UFRaw costs precisely nowt except the download.