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Also depends on the texture you're trying for. Use a 2 inch exacto blade for clean cuts or rough cutting tools mentioned earlier such as steak knives, or saw blades for a more textured look.
For cutting a canal in 2" thick foam I used the item below that I found at Lowe's for about 20.00. It has several tips and you don't have the mess associated with saw tools.
That structure was constructed from scratch using .060 sheet plastic and in some cases, Pikestuff rollup warehouse doors and concrete steps. These are available through Walthers or Rix Products who manufactures Pikestuff.
For cutting shapes before final mounting, I like a jigsaw.......it's much faster than any hand powered cutting tool.......once the foam is in place, then you can go to the hand powered stuff for final shaping. I'll use a dremel or a roto-zip for some things, but they makes a big mess, so I only use them when I need to......I find a shur-form tool to be invaluable for shaping contours