I use Zynewave Podium, personally.
There’s a free version, which is about the best of anything you can get for free, and the paid version is good value for the money. Either way, you get the best interface of any DAW. I’d particularly recommend it if you want to mix recorded tracks with sequenced backing tracks or some sequenced parts. (I wouldn’t recommend it for doing a lot of loop based stuff, but then, you’ve already got Acid for that.)
If you want to put together a proper home studio, the next thing you’ll need is a good audio interface. This is a bit more tricky, because you’ll have to choose between firewire and USB. Firewire interfaces used to be the recommended thing, because they were faster than the USB 1 standard. But these days firewire is becoming rare, and cheap firewire doesn’t work well with firewire audio interfaces. So a USB 2 interface is the best bet at the moment (until lightpipe or one of the other new interface types get established).
Personally, I use a Lexicon I-Onix USB interface, but that was a bit of a self-indulgence on my part. You can get away with something a bit cheaper. Focusrite is the popular quality brand at the moment. The bass player in my band (who has a better paying job than me) has an Allen & Heath ZR16, which is a serious bit of kit, but really nice if you can afford it. I suggest you buy the best interface you can afford. Buying a cheap one is a false economy, because you’ll only have to upgrade it down the line. It’s the same with those USB microphones – they become redundant as soon as you start buying real microphones, so don’t waste your money.
You’ll need microphones. The best microphone to buy starting out is a Shure SM57. An SM57 will never stop being useful, no matter how many microphones you end up buying as you go along. They’re cheap, and they’re an industry standard. You’ll see them on stages, and in the very fanciest recording studios. People have recorded entire albums using only SM57s.
What else? If you want to get into the sequencing thing on your computer, you’ll probably want to buy a controller keyboard. Playing parts into a sequence beats the heck out of programming a sequence note by painful note. You don’t have to spend a lot of money here. I use a Behringer UMX controller, and they are cheap, reliable, and come in a bunch of different sizes. Or if you don’t have much desk-space to spare, you could get a Korg Nanokontrol.
To good results, you’ll want to start building up a good collection of VST plugins. That doesn’t necessarily have to cost you anything except a bit of time, going through stuff and trying it. I’d start with the Melda Free Plugin bundle. The Melda plugins are good quality, and you can either use them for free or pay them a small fee to make the nag-screens go away. After that I’d go for the Antress Modern plugins, which are truly free (although sometimes a little buggy), and mostly good quality. In particular I like Modern Black Dragon, which is pretty much indispensable to me. Finally, I’d get all the free Variety of Sound plugins, which are very good. There are also a ton of free VST instruments and effects out there. KVR Audio has a database of what’s available.
And that’s pretty much it. If you set up a home studio like the one I’ve described above, you should be able to make recordings 90% as good as any commercial release (with a bit of practice). If you want to go that last 10%, you’ll need to start looking at room treatment and good studio monitors, or maybe get yourself a really good set of open-backed headphones.