You certainly can get effects for your computer setup with Cubase. Some are free, some cheap, some expensive. You'll still need some outboard gear- depending on your setup- like a compressor, definately a preamp or two, maybe an effects unit if you need a particular sound from it.
If you computer has a CD burner, you'll love the ability to burn your own CD's from the mixes you make in Cubase. Its pretty simple. MP3's are easy, too, though you may have to buy another program to make them.
There are ways to get a fat guitar sound with digital equiptment, but there really doesn't seem to be any way to beat anaolg equiptment that way. I prefer Cubase for its ease of use, flexibility, and expandability. Besides, on my humble 800MHz laptop I get 22 tracks of 24bit/44.1 audio.

With a LOT of digital effects thrown in for good measure.
Track to dollar, I don't think anything beats recording on your computer these days. Cubase has come a looooong way since '95, too.
Take care,
Chris