Vocal mic. ....   AKG Perception 100..... $100
Instrument mic.. AKG C1000S.....         $250 (Years ago)
Audio interface,, M Audio Fast Track Pro. $250
Programme..       Mixcraft 3             $50
Has phantom power, ASIO, inserts., pads, midi & more.
24 bits at 44.1 is what I use and is pretty well standard.
I started out with the M Audio 2 which came in around $100 and then passed it on to my buddy who will add Harmonica, Whistle, Bodhran at home and either e-mail his tracks to me or we'll use memory sticks.

There is just no limit to what you can do now.
Lay down a track. E-mail it to other musicians and let them add their tracks at their own leisure. No studio costs and when your done... take it to a real studio for mastering if you like.