CAMERA:
Pure Digital Flip UltraHD mini digital camcorder (review)

SOFTWARE:
Windows Movie Maker 2.6 (usually pre-installed in Vista)
…gives you the tools to create, edit, and share home movies. Compile and edit a movie from video clips with drag-and-drop functionality. Add special effects, music, and narration with ease. Share your movie over the Web or master it to DVD media. You can also save your movie back to the DV tape in your camera.

Windows Movie Maker (usually pre-installed in Windows XP) 2
…is an XP-only download that gives you the same tools to create, edit, and share home movies.

Audacity is free, open-source software for recording and editing sounds. It is available for Mac OS X, Microsoft Windows, GNU/Linux, and other operating systems.

MP4 FastStart
H.264 MP4 is a great format for the web, as are all the MP4 variants. MP4 is both a part of Quicktime, and now a part of Flash. The problem is that many of the editors and converters out there, like Sony Vegas and Adobe Premier, produce MP4 files that don’t work well on the Web.They won’t progressively stream. The entire video has to download before it will start to play.

MP4 FastStart fixes the files so they can be streamed. It adjusts the MP4’s metadata to allow for Flash players to play them right away (Fast Start), while it progressively downloads,,, abd it’s free.