I have Propellerheads Reason with a Balance audio interface. This hardware and software combo is great for a complete recording solution. It comes with all sorts of virtual keyboards, guitar effects, sound processing and drums machines and provides many different ways of creating sounds. The down-side is that it only has 2 ins and 2 outs (plus one headphone).
I also have Pro Tools 8 (M-Powered) with an M-Audio Projectmix interface and Focusrite Octopre LE ADAT IO expansion. This provides me with more than 16 simultaneous inputs, 12 outputs, 2 headphone outputs and "flying faders". Pro-Tools is easier to get to grips with because it does not come with the vast number of included stuff that Reason has. Reason can be intimidating because of all the options, but it is consistent and logical and there are some good video tutorials available (I got some from eBay for a fiver) that explain all the various modules and what they all can do.
Reason is a "closed" system, although there are a small number of expansions from Propellerheads that increase the available sound-shaping options. Pro-Tools uses "RTAS" plug-ins from a wide variety of different companies. For example, I have bought Melodyne pitch correction software and "AIR Strike" drum simulator to work in conjuction with Pro Tools. Reason has it's own pitch correction tool and various drum machine modules, samplers and beat boxes.
Pro-Tools is notoriously touchy about system requirements and interfaces used, whereas Reason seems to work perfectly out the box and with minimal configuration changes - it is far less fussy about system resources and stable under load. I can use them both together, since there is as Reason RTAS plug-in for Pro Tools. I think I can also hook up my Projectmix to Reason, although I have not looked into this as yet, since the Projectmix only goes up to 48K but the Balance interface does 96K.
About mics; I'd forget about a Shure SM57 cardioid, since they are better for live work - and use a condenser mic for recording instead, such as a Rode NT1A (or better). You'll also want a decent pair of studio monitor speakers and headphones. I use Urei 813c speakers, along with the far more reasonable an manageable Adam P22A speakers, with M-Audio and Beyer cans. You may also need a huge monitor screen (or twin monitor set-up), since there is typically so much going on in a recording session.
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