Yo Billabob! You are the rare exception on this board, because you are asking for the possible, and even more unbelievable, you have a realistic budget. I salute you! Three things leap out at me:
1. You need a mic. Don't scrimp there. I'd get a Sennheiser MD421. Great on cabs, fair as a vocal mic. If anybody is going to sing into this thing, consider Shure SM7b instead.
2. You need an interface. You may eventually go to an outboard preamp, but for now, M-Audio Fast Track Pro or Line6 UX2 (my caveat emptor- some Line6 gear is pretty cool, and the UX2 is. But- they are useless for product support and create planned obsolescence.)
Monitors? AKG? Are you talking about headphones or speakers?
That's my best shot. Get a decent cab mic, a decent interface, and spend anything left on a set of cheap monitors. If you already have the speakers, hang onto the rest of the money for now. You record things. The need to buy things will come up.-Good luck.-Richie