Yo Gcapel, welcome to the board! You are in deeper kimchee than you have any clue. Everybody is trying to avoid telling you that what you are asking to do is likely to be done rather badly, or will take a lot more money, or both. I won't tell you it's impossible, but I will tell you you are in for one steep learning curve. I'll give you some advice, and a little recording 101.
First, that part about *don't spend any money right now* is the single most important piece of advice you've gotten. Take that advice. You aren't ready, by a long shot.
It sounds like you've already committed to doing this with a computer, which is a perfectly good way to do it. The other most common way is to use a specialized multi-track recorder, sometimes known as a SIAB (studio in a box). The third way is to record analog, on real tape. You don't have the budget to do that well.
Next, your response to the question about building a recording room is the first dead giveaway that you are not ready for this yet. The room is more important than how you record, or what you record with. The only thing more important is what you are recording. If you record in a bad room with world class equipment, the best you can get is a very accurate recording of how much that room sucks for recording. Spook around for a while on the studio building and display forum. Figure out where you are going to do this, and try to learn how that space can be modified to improve its acoustic properties.
If you are recording a band onto separate tracks, the absolute minimum is 4 simultaneous tracks, and 8 would be a lot better. They have to get into the computer, and the most common way is to use an interface with Analog to Digital conversion (A-D). Usually, for more than 2 tracks, the transfer is by firewire, so the first general rule is that your computer must be firewire enabled.
Every microphone must go through a preamp, which raises the weak signal of the mic to line level, before the A-D conversion takes place. Preamps vary from $5 to $5000 a channel, and mics run from $20 to $5000+ apiece, so you are going to have to make decisions, and sacrifices. Aside from room conditioning, mics and preamps are the first thing you need to start studying. The quality of the mics and preamps you use will be critical to the quality of the finished recording.
When people overdub, adding additional tracks, they need to be able to hear what they are playing along with, which requires headphones with excellent isolation, so that their mics don't pickup the rest of the tracks from the headphones (headphone bleed). This requires a headphone distribution amp, headphones, and the beginning of a cable collection which will add to your sticker shock. Cheap cables are a bad investment, because they break, and often have poor shielding, resulting in radio frequency interference, which is fine, as long as you don't mind listening to the AM news on your finished recording. RFI can also be picked up by your home electrical circuits, so a voltage regulator and power conditioner may be required, depending on how good your circuits are, and how near you are to high output radio transmitters.
You have to hear the music to mix it, and headphones are useless for mixing. Studio monitors are specialized speakers designed for mixing. Even cheap ones are painfully expensive. - more expensive cables.
A whole bunch of mic stands will be necessary. Probably one heavy duty boom, a few smaller booms, and a mini-boom for recording kick drums. A desk stand is good too, so you can have a talkback mic, to talk to the nice overdub guy wearing those isolation headphones.- more cables.
There are many other things which are nice, but which you will have to skip initially, but you will want them anyway. Example- a patch bay, so you are not crawling around changing around all the cables every time you want to record something different (more cables)- a high speed CD duplicator, so you are not burning out the CD-ROM in that computer burning CD's for the overdub staff, so they can hear what they are going to be playing along with. It sounds stupid, but a couple of chairs and a table or desk that don't make any noise will be absolutely necessary.
The peripherals can kill you- amp stands, because you really need to get cabs off the floor to record them. Guitar stands, music stands, because the lead singer never could remember the words. A shitload of CDR's, more cables, and of course, a Lava Lamp. Don't ask why, just get one. Did I mention mic clips, shock mounts, stereo mounts, and pop filters? Yeah, and those monitors require speaker stands.
You will also need software, which is pretty cheap these days. Audacity is free, and Reaper can be had for $50. Lots of folks here love it. High quality plugins for EQ, compression, and reverb/delay will be absolutely necessary in the mixing process.
Now, do you begin to see why the people here, who actually own or work in recording studios are having problems answering your question? It is as if you have asked- "How do I enter the Indianapolis 500 with a $3000 budget?" Oh well. Believe it or not, I'm trying to help, not to rain on your parade. Unfortunately, the best help I can give you starts with a reality check and a clue-by-four.
My last advice is to spook around on the equipment for sale forum, Craig's list, and ebay, because buying as much of this used as possible will help stretch your budget. And- no matter how good the prices are, how many cool features they have, and how many lies the marketers tell, buying really cheap equipment from Behringer and Nady will make your situation worse, not better.
OK, there's the advice- here's a little gear 101- There are so many choices here, and so many opinions, that it is bewildering. I'm going to discuss some categories of equipment here, and every time I give you a link, I'm recommending one of many alternatives. Everybody has their favorites, but I'm recommending something because it has been proven to me to be a pretty good buy in its pricerange. I'm avoiding lots of lovely pieces of gear that work well, but will kill your budget. This is by no means inclusive, but covers some of my favorite cheap pieces of gear:
Mics: You will want at least this much:
A pair of small diaphragm condenser mics, hopefully matched. Good for drum overheads, and acoustic instruments.
http://www.8thstreet.com/product.asp?ProductCode=6679&Category=Microphones
A couple of cheap dynamic mics. Good for snare drum, toms, guitar cabs, or for talkback:
http://www.8thstreet.com/product.asp?ProductCode=1361&Category=Microphones
A dedicated low frequency mic, Good for kick drum or bass cabs:
http://www.8thstreet.com/product.asp?ProductCode=1053&Category=Microphones
A large diaphragm condenser mic, good as a main vocal mic, but with countless other uses:
http://www.8thstreet.com/product.asp?ProductCode=6458&Category=Microphones
A badass, higher end dynamic mic- good for vocals where a condenser just doesn't work, and also good for percussion, snare, cabs. Wherever a cheap dynamic is good, this is better:
http://www.8thstreet.com/product.asp?ProductCode=7308&Category=Microphones
Alrighty- a basic 8 channel interface:
http://www.8thstreet.com/product.asp?ProductCode=43734&Category=Audio_Interfaces
Good headphones:
http://www.8thstreet.com/product.asp?ProductCode=10952&Category=Monitoring
Cheap headphones that work:
http://www.frontendaudio.com/MoreMe_Studio_Headphones_p/1798.htm
Heavy Duty mic stand:
http://www.8thstreet.com/product.asp?ProductCode=10813&Category=Stands
Cheap monitors:
http://www.8thstreet.com/product.asp?ProductCode=43453&Category=Monitoring
As soon as the money becomes available, add this:
http://www.sweetwater.com/c407--M-Audio--Subwoofers
Here's a handy item- called a channel strip, it is a somewhat better preamp than the ones in the firestudio. It also has EQ, an optical compressor- good for critical tracks like main vocals, where you need a better preamp. It has digital output, so it can go into the firestudio digitally, bypassing its mediocre preamps. No, it's not a great preamp, just a *better* preamp:
http://www.8thstreet.com/product.asp?ProductCode=43702&Category=Audio_Processors
A word about guitar amplifier modelers, such as Line 6 POD:
For right now, don't do it. Take the best dynamic mic you've got, put it in front of whatever amp the guy uses, and move it around until it sounds good. That process alone could take you a year.
I would be remiss here if I didn't recommend a good SIAB. While expensive, it bypasses the need for a computer and a separate interface, and offers increased portability;
http://www.8thstreet.com/product.asp?ProductCode=40008&Category=Recorders
or this:
http://www.8thstreet.com/product.asp?ProductCode=21800&Category=Recorders
Given your limited budget, one of those might offer you significant advantages, given that your budget has to cover a computer as well.
I'd say that's enough for now. I expect I've given you a few things to think about. Spend your first $100 or so on *books* about recording and mic technique. Good luck. I expect we'll be hearing more from you in the future, as your understanding increases, and you can ask better, and more specific questions.-Richie