Since your end result need not be super-fine quality video, you can probably pick up a Hi-8 digital camera for under $300.
I think Windows Movie Maker (comes standard with XP I think) will allow you to import form a video cam.
I don't know how much total editing ability it has though. I haven't used it.
You could also get one of the dvd cams, but they're expensive right now, and you will still likely want some editing capability. I think you can edit in camera with them, but you'll likely want finer editing capability than that.
I just sold an older version of my video editing software to someone on this board. It was a good deal, but don't know how they are making out with it.
I looked at Windows Movie Maker last night. I will allow some editing. I even has a half-speed filter. However, sound is an octave lower. With the Vegas Video, you can monkey with the sound and keep it at the same octave.
VV is a slicker and more capable editing environment.