hmm well i think i paid like 200 bucks Canadian for my audio technica condensor mic, it was the best purchase i have made so for, i really like it. You will probably find a big imporvement with your recordings by using better mics. Maybe you could rent / borrow one from guitar centre to try?
as for software, if you don't plan on doing any midi work, i would suggest getting your mitts on an old copy of Adobe audition (then called cool edit pro) it is probably dirt cheap now and is a really great program for recording. Adobe audition is even better if you want to pay a bit more. If you are looking for more of a totoal package (soft synths, midi etc) i would suggest sonare 3. I like it as it works for me well. There are tonnes of opinions on which software to get but those are my favorites.