This is not a black and white answer. It depends on who you ask. I think hardware is still better. But outboard digital hardware processors are custom software with customized hardware. Many of the modern software packages or plugs are as good or better than some of the older or even some of the newer cheap budget outboard and effects processors including those that are analog.
For audio recording, it is not so much which is better as it is which is better for each person and their working style. For the amount of money you'll spend, you'll get more features out of software and a PC then you will with any other type or hardware/software combo. I think it takes way more effort, is more frustrating and in general is much harder getting great sounding product by using a digital only approach. I like many others, prefer the combo approach where I use great analog gear for processing the input signal before going to digital into the DAW (PC), then the software is used for audio editing, MIDI sequencing and control, some level and mute automation but use a real mixing board for the mixing stage to avoid the digital mixing bus and plugs issues, using very good outboard effects and doing even more analog processing before going to the final 2-bus mix which is often into digital again and then to the Mastering stage where it might be further processed in both digital and/or analog before the final digital made finished CD.
Great analog hardware gear processing is a much different thing and I don't forsee that being outdone by software or plugs for quite some time in the future, if ever.
For most of this analog or digital stuff these days, you pretty much get what you pay for.
