Check what Casper reported some time ago:
http://www.8notes.com/f/46_164458.asp
If you want something cheaper than his solution, I suppose you can use any good dynamic cardioid mic (Sony about 100$), Audiotrak about 60$ o r many others). Do not use cheap miniature condensed mics.
For SW you can use the free SW Audacity (the sourceforge). You must have a good sound card in your PC, with mic input or otherwise an external pramplifier for the dynamic mic.
Good luck!