ya photoshop is what you would use to make something like the picture you posted. to do more cartoon/vector/tyopgraphy work then i would use illustrator.
I would use Illustrator, since its a vector file you can resize your logo/decal/emblem its much easier for the print shop. Then just add it to your photoshop image. .
edit:
Or you can design one without using illustrator and then give this a try...