Well i just plug my guitar into the PC directly using the audio cards input, (the black one) not the red microphone one because that cant handle hot signals, you can buy an adapter that takes the normal size guitar plug that goes into your amp and resizes it smaller to a 3.5 small plug that goes directly into the back of the PC

Then i use either mixcraft or ableton live with a plugin called guitar Rig 5, seems to work very well.

This is how i recorded this, the guitar playing might not be that hot but i hope you think the guitar sound itself is....

http://www.youtube.com/watch?v=Bzscz6dA21E