Kudos to Scott August for a recent post about recording your own music.
Here's the link: http://www.cedarmesa.com/blogfiles/recordingyournaf.html
In the article, Scott talks about all of the technology including microphones, audio interfaces and software. He then outlines several options and price levels for buying equipment. If you've been thinking about investing in a home recording studio, you need to read this article first.
I attended a recording workshop which Scott presented several years ago presented by the NCFC, he's a consumate recording artist and it's reflected in the quality of his recording. (By the way if you would be interested in having the NCFC sponsor Scott for another similar workshop, drop me a line... we're planning the 2007 calendar). He does all of his production in his house, on his Apple computer. He records all of his flute recordings in a 4'x4' closet in his office/studio (spare bedroom...). Scott should be an inspiration to everyone who wants to do your own stuff, in your own studio, beginning to end. I am not aware of anyone else out there in this market niche producing the quality of recordings which Scott produces as a one-man shop.
I won't say that Scott records on the cheap, because his day job is composing and recording soundtracks and music for Hollywood movies, commercials, etc., so he has a pretty high end setup. Scott is also a very detail-oriented guy, so I know that he dedicates a lot of time to composition and mixing of his music, getting just the right feel, mood and sound for his compositions.