For recording I use Samson USB mics, I've got two of the dynamics ($50 each) and one condenser ($80) (available at Sam Ash and elsewhere). You can easily get by on one if need be.
I run these straight to the computer, and record on Kristal Audio Engine, free multitrack software, check google for it. Lots of great VST plugins out there compatable with Kristal, check
www.vstcentral.com
Everything at
www.myspace.com/heartlesshearsemen was recorded with this set up. (the bass by the way is a ccb dog house, K&K pup, GK head, late 60's 4x10 Gibson PA cab, not played by me but by Travis Trash. I'm playing the Gretsch 5125 through germanium boost, Carl Martin Red Repeat, Stinger Verbasonic 2x10 combo w/ JJ Tubes)