My (ahem!) expert opinion on what is necessary for a home studio!
A mic (the better, the better)
Another mic (preferably the same kind for stereo stuff)
Yet another mic (maybe a good vocal mic? Something different)
Cables and stands
A preamp or mixer with decent pres. (I have an Art Dual Tube MP and an Alesis Sudio 24 mixer.)
A decent compressor. (Really handy if your playing/singing skills aren't the greatest). I use the RNC.
A recording device, preferably a computer with a good prosumer recording soundcard. (You can't burn CD's with a cassette 4-track)
Recording software and effects (many cheap and free options out there.)
Nearfield monitors! They make a WORLD of difference when it comes to mic placement and mixing. Really!
I think that's about it. Add better mics, more pres, and better software and effects as the budget allows.
Take care,
Chris