The following answer is compiled from the comments, so that we can remove this question from the "unanswered" list.
The problem you are describing is characteristic of a path problem with your shell profile. To determine whether you are able to run the makeindex command from the command line, you can do:
which makeindex
This should return: /usr/texbin/makeindex. If it doesn't, and returns nothing, then your TeX binaries aren't being found. (They are found by TeXShop because it sets its own path for all commands.)
To see what your path is, you can enter:
echo $PATH
This should return something that includes /usr/texbin; if it doesn't you need to fix that in your .profile or .bashrc file.
If you're using MacTeX 2008, you have a really old distribution. I would strongly encourage you to update to MacTeX 2011.
As egreg notes, for multiple indices the package imakeidx is useful, as it automates the run of makeindex. (He is the author of imakeidx.)
which makeindexreturn in Terminal? Also, what doesecho $PATHreturn? – Alan Munn Sep 2 '11 at 15:42/usr/texbin. (Assuming that existed in 2008; I think it did.) – Alan Munn Sep 2 '11 at 16:05makeindex. Give it a try. But, first of all, solve thePATHproblem. – egreg Sep 2 '11 at 16:09/usr/texbinalready existed, and now I have set it in the path. Downloading MacTex 2011 now. – DaG Sep 2 '11 at 16:36