As far as recording software goes, the biggest name is always a good investment. Softwares like Sonar (http://www.cakewalk.com/) or Cubase (http://www.steinberg.net).

If you play an electric guitar, you pretty much have two options. Either record direct or mic you amp. I go direct. Depending on your gear, you might already be able to do that. I use a Line6 Spider amp and it comes with a line-out. I could connect the line-out of the amp directly in the LINE-IN of my sound card.

I didn't test out many mics but I have a SURE SM57. I think I paid around 100$ and it does a very good job.