You are about to step into a black hole! Home studios have a habit of treating you like a crack head, you'll start spending every spare penny on yet another gadget. Do a lot of reading and research before you spend anything. You'll find a thousand different opinions over what is "best" but if you keep reading you'll start to get an idea what is "best for you" based on your individual needs and budget.
Firewire is a high speed compter connection that allows your input device to transmit data to your computer to store on the hard drive. Computer based recording seems the be the wave of the future and offers a lot of power and technology for a moderate price. Always try to have MORE computer processing power than what the component requires. Also, get a second hard drive to back all music files. CD burners are not a good way to go for backup. We were doing this and found out that when we brough the files back (after a hard drive crash) they were full of digital beeps and clicks that we could not remove.
If I was starting from scratch, I'd consider a really powerful computer (laptop may offer a mobile studio solution but harder to work on and upgrade) and the new Alesis MultiMix system. They offer several different choices but I would pick the MultiMix 16USB seen here:
http://www.alesis.com/product.php?id=39
Musician's Friend is showing them for $349 right now which is a really good price. This will be your mixing board with phantom power and 8 XLR inputs and comes with Cuebase LE for your computer. Now, Brandon or someone here more knowledgable would have to advise how much computer power you'd need as far as processor speed, ram, hard drive speed, motherboard speed, etc...