An outboard compressor would be nice to have - sometimes.
Now, back to the original question.
Start at the center - the beginning, as it were. Your recording space. This is the most difficult and most important part. This is the part that even big studios hire-out to a professional - though you can do well following suggestions from many sources, online and in magazines/books. Next. A decent computer, relatively modern with a "fast enough" processor and enough ram(See the "requirements" list for your chosen software and devices). The next step is a competent "sound device" - your sound card or interface. Without this "base", you can go no farther. Now! Start attaching the actual things you will use to record your sounds. Like a mic preamp/DI. Without a fairly good one no mic you attach to it will sound as good as it can. Follow this with a microphone of the type/quality you need/can afford. After that a nice pair of speakers will help you "know" what you've recorded and to do a good mix, which will transfer well to other sound systems. Follow all of this with lots of experience(Upgrading everything as budget allows or as individual pieces begin to limit you).
Waa-Lah! You are now a recordist!
Yes! You can keep things relatively inexpensive, but, as you suggest, the 35 dollar sound card, for instance, is one of those things that begs for upgrade... You should be able to put together a nice "demo" system for less than your computer cost(Unless you got a really good deal from QVC, or something?)... 1000 - 1500 bucks should do it - equipment-wise. The room? Little money but lots of your time and effort will help alot... The thing you need most is simply to "read-up" on this stuff. Mix Magazine, basic recording books, forums like this, etc., can be a huge help.
Another suggestion? One of the very portable(Pocket-size even!) "flash card" recorders with a nice Shure SM57 or 58 and a decent set of headphones. "All-in-one", simple, cheap(?). Transfer it's recordings to your computer for mixing/editing/burning. Your soundcard, itself and other inadequacies of your computer, will not then enter into the picture nearly as much. And, you can record anywhere that "sounds good"...
Teddy G.