Right now, my music "studio" consists of the following low-end setup (no joke):

One standard computer
Sony ACID 5.0 (the FREE version - I may upgrade or buy FL Studio/FruityLoops one of these days)
Audacity (freeware)
One omni-directional desktop computer mic from QuickShot (I got this years ago. It was cheap. It actually works pretty nicely.)

Many of the loops I use for the dance music come from Peace Love Productions. I love their loops and highly recommend them. Plus, you can't beat the name.

I do have some real musical instruments on hand, though they are not being used for Pranamana productions just yet:

Selmer Mark VI Alto Saxophone
Cheapo Electric Guitar (a Kramer, that you can buy online for about $70 - gets good reviews though)
Jasmine Acoustic Guitar (actually, this is a decent low-end acoustic with good action)
Stagg Classical Guitar ($60 from Craigslist including gig bag; surprisingly good action and decent sound)
Old Roland keyboard circa 1992 (no synthesizer capabilities)
Flea Ukulele (don't be fooled...these ukes are made with plastic but sound terrific!)