doON...
It's D.I.Y. with affection. I use a WAMI-Rack 24-bit audio + 64 channel MIDI synchroniser for recording, getting on a bit in tech terms, but has flexable connectivity and on-going driver support.
If your setting up in this format and don't have software, something like Focusrite who include a lite version of Pro Tools is a good option, offering flexability at good price (UK).
I used RODE NT1a microphones for vox & electric guitar on Elizabeth's Drowning, and for acoustic on Empty Frames.
Otherwise stuff is synth/sampler emulations interfaced with MIDI guitar.

Its vital to get your recording environment right too. This makes a huge difference to production. I don't use studio monitors at the mo, but check mixes on various systems as possible before finalising.

For virtual instruments Reaktor and FM7 by Native Instruments are great synth tools. Steinberg's HALion is a friendly low-cpu sampler emulator. This was used on 'Mr Green Thumbs' for nylon acoustic, and drums on Hairy Berry :-)
...and the best songs are usually the new ones :-)