I use both hardware and software compressors and I'd be unhappy if I didn't have both. However, if someone had to take one away and leave me with only one option, I'll keep my hardware comps, thank you...
There are good and bad compressors in either variety. I have 3 hardware comps that I use, and one that I don't cuz it doesn't sound as good. I only have one software comp that I use cuz it sounds great and the rest I've tried don't sound as good. Here's what I have...
Hardware:
dbx 166 (original blackface): good easy to use, smooth, darkens the sound just a tad (in a nice way), has a gate.
Fmr RNC: more transparent than the dbx, but not as warm. Good for stereo sources.
NTCL: great smooth compressor that can squash the snot out of anything and still sound beautiful coming out the other side!
Software:
Waves Rennaisance Compressor: This is by far the best and smoothest software comp that I've used. Powerful compression without degrading the sound. Unfortunately it uses LOTS of cpu power so I can't run more than a couple at a time.
Here's what I have and DON'T use: Alesis 3630 (I keep it around just for the gates until I buy a Drawmer, but even then I haven't plugged it in for a couple years), any other software compressor that's on my computer. I'll use the channel compressors in Cubase sometimes if I need to, but never on anything real important. They just don't sound that good.
...What was the question?... Oh yeah... Dude, get yourself a decent hardware compressor. Like you said, you'll be able to get a hotter overall level into your computer. There's nothing wrong with compressing a little on the way in, and then again later in the computer. Actually, multiple stages of light compression usually yields better results that trying to heavily compress all at once.
Now before you go out looking for an NTCL, I'll tell you you can't find them. Well, at least not one just like mine. Why? Cuz I made it myself! It's basically an LA-2A that I made by hand using Dave Jahnsen's book as a guide.
http://home.earthlink.net/~djahnsen/ I haven't been able to A/B it with the real thing, but I do know it sounds great. Take a look:
http://photos.yahoo.com/bc/naokiman...order=&.view=t&.done=http://photos.yahoo.com/