For tools, the first thing you need is glidden gripper. Accept no substitute for stacking foam together, this is the only product you need.
For shaping the standard foam cutting tools work okay, but I had some of my best luck with my wife's pumice stone. Now the stone is generally used for scraping callouses of one's feet, but it does a great job roughing up otherwise smooth foam board surfaces. A rasp type file works well too.
I have a straight hot knife, but like this battery operated unit as well.
Here's my work. This is the top piece f6my Halloween layout.