Hear is what I would pick, and why, for $500, if I was in your recording situation.
($90 X 2)---(2)sm-57 : Workhorse of dynamic microphones. Very narrow pickup pattern so it does not pick up the room as much as some other mics. Good for live use too because of feedback rejection. With two sm-57's you can record drums in stereo, and they would serve as a bare-bones solution to your recording setup. Also can be used with care on vocals, acoustic guitar, electric guitar etc.
($160)---M-audio DMP-3 : Great sound for the money, probably one of the most bang for your buck preamps in it's price range. Some say it has a clean sound - some call it "sterile." Has a decent amount of gain, and phantom power for when you add a condenser mic to your locker. Has two XLR (mic) inputs. Also has phase reversal switches which can be important when stereo miking.
($150)---Delta 44 : Very good quality for the money, easy to use and install. Would allow you to record the 2 sm-57's as separate tracks simultaneously. The breakout box is also built fairly solid, which is a good thing, especially in tight spaces. As you add to your gear selection the Delta44 would provide some amount of room for expansion, with 4 inputs and 4 outputs, allowing you to record 4 tracks SEPARATELY, and SIMULTANEOUSLY onto your computer (with proper software.) Sorry for the caps but these concepts took me a while to get, and they are important to understand when purchasing gear.
Total ~$500
IMHO - With the right techniques and careful thought put into your actions, this gear can be used with surprising success, especially for demo quality stuff.
Tip - If you walk into Guitar Center with $450 dollars cash and ask for all these things at the same time and make them an offer you might just walk out with what you want.
Hope this helps - Jason