For guitar amps, I highly recommend the Line 6 Spider 112 50W combo. It's plenty loud, sounds amazing, has effects and headphone out, and can be had used for around $200, which is a steal for the quality of it.
For bass, I'd look into cheap Peavey heads and some Legion Sound cabs on eBay. I got a brand new Legion stack (410 and a 118) for $250, and it was surprisingly good. I got it just to check it out, and then sold each cab individually to get my money back and then some. The 410 was 600W RMS, the 118 was 300W RMS. I'd get an old Peavey Mark III for amplification. They're pretty common for under $150, and they're plenty of power for start-up musicians.
Drums... $1000 is a lot for a starter kit. You could easily score a good used 5-piece with cymbals for around $600 or so. Try to save some of your budget for cables and drumsticks. Also, you never know when you'll need to replace a cymbal. Wuhan makes cheap cymbals (I bought a few 12" china crashes for $10.00 each from MusiciansFriend).
I'd buy used guitars and basses if you can because you'll get more quality for your money. Maybe Ibanez or MIM Fender basses?
As for guitars, I actually 2nd the suggestion about Epiphones. The Les Paul Special II is a surprisingly nice guitar. You could also get a vintage Kay solid body electric on eBay for around $100, and they rock. (I only know because I have one, passed down from my grandpa. It sounds great and looks sweet too.)
You can get some decent mics cheap. I bought an Audio Technica ATR-30 for $15 brand new on sale at a store... I swear it's every bit as good as an SM58.
For a PA, I'd go with a small powered mixer (maybe a Yamaha 640EX... they go used on the 'bay for around $200-250 I think) and some 15s with horns maybe. Carvin makes some cheap PA stuff if you have to go new. But used, you should be able to put together a real nice start-up PA for around $500 + mics.
For recording, I just got a Tascam 788, and it's superb. The on-board effects and such are outstanding, and it'll do 6 tracks simultaneously (most only do 2). I got it from a TBer for $250, but they can be had usually for around $300-350, and are worth every penny.
Did I forget anything?
Oh and as something to think about, if you go to a music store and tell them about the situation and the whole "helping the kids" thing, they might cut you a good package deal, or even donate a piece of gear or 2. They might at least offer to outfit you with cables and sticks, which will help considerably, as mic and instrument cables could easily set you back $100. And free drumsticks would come in handy when your newbie drummer breaks a stick or 2 at every practice.
Also check out SX guitars and basses (I think it's
www.rondomusic.com). A lot of people have praised them heavily for being a lot of bang for very little buck...
Hope this helps give you some ideas. Keep us posted!
Jake
