There's a great tutorial here:
http://gnuradio.org/redmine/projects/gnuradio/wiki/OutOfTreeModules
The gr_modtool work flow is that gr_modtool generates a lot of the required boilerplate code used by GR and then you edit those files with your signal processing code. Notice there's section on python blocks in the tutorial (Tutorial #3).
It sounds like you've already got your signal processing code done. I would suggest copying what you have in to the boiler plate code generated by gr_modtool. An alternative is importing what you already have and edit the work: function to call what you already have.
Make sure you tell gr_modtool that you want to generate a python block with the -l switch. Going through that tutorial will be the single most useful thing in learning how to make a new block.