I got a cheap Tascam US-122 USB Audio interface for about a hundo-fifty that adds so much versatility without having to go directly into your soundcard (which, unless you have an amazing sound card, is not the way to go). It's definitely not the greatest thing out there, but it sure gets the job done for me. ($130 on ebay) I use a low-end XML vocal condenser mic that sounds a lot better than any cheapo thing I've found and I think it was part of a $150 pack with an instrument condenser. (But I just found it on e-bay for $39 + shipping) Maybe a little more than you're looking to spend, but it gives you some solid sound. EDIT: I used to use a really cheap program called MAGIX Audio that worked just fine, now I use Sony Vegas, which is nicer.