The quality of your recording depends to a large extent on your soundcard. You must have a good soundcard if you want your recordings to be really good.
As my soundcard, I use the Audiophile 192 by M-Audio. Its a 2 in-2 out soundcard with a sampling rate of 192Khz which is more than enough for any home recording purpose. I got it for about 10K or so. I would recommend it to anyone who is getting into home recording since it is affordable and produces great results. For a beginner, this soundcard is great!
You can also go for an external sound card which makes it easy to connect and disconnect cables. MOTU soundcards are great but they can be quite expensive.
As far as the mic goes for vocals, I would recommend using the SM 58. It is an absolute delight to reord vocals using that mic. I also use a mic preamp along with it for better results. The SM 58 is available in all big stores and will cost you about 4.5 - 5K only. After some experience with it, you'll get into the habit of using nothing but the SM 58, trust me! It is also the most preferred microphone by vocalists for live shows.
If you only want to record instruments, the SM57 is a better option.
Get into the habit of using good quality stuff and you'll get really great quality output...
We're sailing in the same boat...its just that you're looking for a destination and i am not!