Actually, Tjohnston, I have to admire the risk that you took here, and I think that you are trying to be kind to others here because you understand that this forum can arm you with the information to make better recordings. So, you have probably found yourself in a position where you are probably considering spending some hard-earned cash on some gear, and you want to know if that expenditure has the potential to make a good-sounding record. I think this is the entire point of your post, and here are my thoughts.
1) You can judge performance by listening in Lo-Fi, but you can't judge sound quality by listening in Lo-Fi. Sometimes, Hi-Fi isn't really that cool either. It's better to have copy of the CD and A/B it with some pro stuff on your system to get an accurate feel for a sound quality comparison. Also, I don't know if this is one of your points, but songs that are played on the radio usually sound different than those same songs on CD. The reason is that record companies have budgets that allow them to master material for either CD, tape, DVD, or radio.
2) A few grand, depending on what you already have, is probably not going to get you in the ballpark of making commercial quality CDs especially if you are going to record live drums. For example,
an API 3124+ is a set of very high-end mic pres that are commonly used in Pro studios on drums. This gear has 4 pres and runs $2800 new. You would still need to buy the cords and the microphones that would do this part of the signal chain justice, and this would only get four mics on the drum set. If you wanted more tracks, you would have to buy more stuff.
3) My advice, for what it's worth, would be to evaluate your goals and decide if you are going to get into home recording to produce commercial sounding CDs, or is your goal to brainstorm musical ideas and produce demos that better prepare you for renting pro studio time. If you are going to do the latter, I would suggest that you buy gear that has a good "bang-for-the-buck" rating to meet that end. Perhaps a Mackie 16 channel board, a PC-based DAW, some good quality monitors, and some value mics would suffice. Save the rest of your money for studio time in a great-sounding studio. This bbs is an excellent resource for learning about that kind of gear. Actually, you can get acoustic treatment pretty cheaply if you are armed with good information, and the Studio Building and Display forum is a great place to learn about this. If you want to get the Pro sound, you are going to want to buy only the best stuff you can because you will be disappointed with anything less and you will eventually get the really good stuff anyways thus making your first investment a waste of money.
Hope this helps,