A trick I learned from John "Massive Master" is to use a couple channels of compression in series. Run your first channel of compression as a limiter (high comp. ratio) to prevent clipping, and your second as a light compression to smooth everything out. The act of compressing may add a bit of distortion naturally, but it will most likely sound better than running the vocals through a distortion pedal. For example, as a couple of people pointed out in other threads, Al Jourgenson gets his vocal distortion by running through 5 or 6 channels of compression.
There was a thread in "Recording Techniques" about all of this. So, you may want to look into allocating part of your budget for some compressors...they'll be useful on lots of things. Some inexpensive options are the Behringer Composers or Autocoms (compressors are one that Behringer seems to do correctly, according to folks around here), or a pair of FMR Audio RNCs (it stands for "Real Nice Compressor". However, with the RNCs, you would need to buy two, because they are only single channel (although they are stereo). People here caution to stay away from the Alesis 3630, though. Myself, I'd like pick one up on eBay and have Black Lion mod it...could be decent. Anyways, I think that with some compression and a good dynamic mic like what's been suggested here, you should be able to do a good job.
There was a thread in "Recording Techniques" about all of this. So, you may want to look into allocating part of your budget for some compressors...they'll be useful on lots of things. Some inexpensive options are the Behringer Composers or Autocoms (compressors are one that Behringer seems to do correctly, according to folks around here), or a pair of FMR Audio RNCs (it stands for "Real Nice Compressor". However, with the RNCs, you would need to buy two, because they are only single channel (although they are stereo). People here caution to stay away from the Alesis 3630, though. Myself, I'd like pick one up on eBay and have Black Lion mod it...could be decent. Anyways, I think that with some compression and a good dynamic mic like what's been suggested here, you should be able to do a good job.