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If you can find them in goos condition and at the right price then you should be very pleased with the following - Sony TRV33 (probably still out of pricerange as its a very popular model), TRV22 & TRV19 (I think these are the model numbers).
The above camcorders are a couple of years old now, but are amoungst the best camcorders Sony have made in this price range. I'm not too sure of their prices second hand, so perhaps even lower models may be all you can afford. Later models do tend to have more whistles & bells but the overall quality seems to have been lowered to squeeze them in at an acceptable price point.
All digital camcorders will have a firewire (aka DV port, iLink, ieee1394) output for connecting to a PC to capture the video. Some will even have DV-in that will allow you to capture back to a new DV tape, and if lucky you might get one with AV-in that allows you to connect a VCR or analogue camcorder and use the DV cam to digitise the analogue tapes so they can also be captured. Don't even try to do this via USB as the results will be poor.
Pinnacle Studio is a very good program for video editing and creating a DVD output, but be aware that a lot of people find the software unstable and have no end of trouble with it. I would suggest you also have a look at Adobe Premiere Elements, Sony Vegus Studio & Ulead Video Studio. All of them can be downloaded from the makers web sites for a free 30 day trial and if you do like one of them they can be bought for around £40 - £50.
Good luck with your start in this great hobby. Let us know how you get on.
Mark.
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