Decent PC (doesn't have to be top of the line but you dont want to crapping out running more than one effect at the same time) Wealth of software is out there, I like Tracktion myself. Reaper is popular as well and sort of "free"
Audio interface. I personally think the Toneport GX can't be beat for the money, its like $79 or something and sounds great.
Microphone. MXL 990 is a really nice sounding and versatile large diaphram condesor you can get for $50 at MF on sale. It works well for acoustic guitar, vocals, overhead drums and guitar cabs. Doesn't excel at any of them but it works and its dirt cheap
Mic Pre. Art Tube MP Its nothing fancy, the tubes a bit of a gimmick, but its $29 at MF and works great
XLR mic cable and stand with boom arm. You can pick these up for about $10 and $15 respectively, don't want to handhold your mic afterall. Also get a pop screen, well worth $15
Im not a drummer nor do I really know any these days so I too use EZDrummer. $99 I think and its got a ton of pattersn and fills etc. Basically anything you'd ever want drum wise it can do and it really does sound good as well
So there you go, assuming you've got a PC already, for about $300 you can get everything you need to lay down some vocal tracks or acoustic instrustments, record your guitar, either via software models on raw tracks or mic'ing the cab, and adding some drum tracks.
The DAW's will let you mix it all down, add effects and master it, and you'll have a finished product
Doesn't mean it will sound great but what you can do on a budget these days is out of this world!
When I started out all we had were 4 track tape recorders lol