What I want to know is what are other ways to create more realistic looking hair than just using particles?
Afaik, particles are the best way. Not too great for long hair, but not much you can do.
Alpha planes and painted hair
As Slink said, alpha planes and painted hair is a good, simple, and fast way to make nice hair. If you want more realistic hair you will want to use particles. Not the current particle system, though, the new one which will be available in Blender 2.50. You can get builds with this system at www.graphicall.org already, but they are potentially still a bit buggy.
Check out the videos here to get an idea of what’s in store: