When automated bone generation isn't good enough, take control quickly and efficiently by combining several repetitive actions into one.
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Select Add bone to selection from the Bones menu. This command will create a new bone, attach it to the selected body bone, weight the location of the new bone toward the parent bone, and hide the selected vertices.
Select some more vertices along the arm, and then choose Add bone to selection from the Bones menu. Continue along until the arm is completely boned.
Using this method you can add a skeleton to a model in a third of the normal commands you would need to use.