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If this is all I want to do am I better off just using a soundcard? Are audio interfaces/mixers more powerful?
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The definitions of "soundcard" and "audio interface" get blurred. If you are going to record music, you MUST use a soundcard/audio interface designed for recording. Some people get around this, but if latency is ever an issue with anything you'll be doing, you MUST have an real deal recording audio interface.
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Do I need a mixer or an audio interface?
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Read this:
Why You Don't NEED A Mixer For Home Recording Quote:
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really want to make a great sounding demo of me on my guitar - with maybe some midi keyboard programming. Can someone suggest a good rig for that?
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What's your budget? You could get into this kind of recording fairly inexpensively. I assume by "rig" you mean audio interface and software. Is this correct? I'm BIG on Cubase. If your budget allows, I'd recommend
Cubase 4 Studio if not I'd go with a cheaper Cubase version.