I have some strong opinions about this, and these are just my opinions (others may tell you differently, but most other professional engineers and producers would agree I think).
The first thing you really need to ask yourself, honestly, before spending money on any recording equipment, is do you have the engineering skills and the ears to record an "album quality" project yourself? You may be a great singer and great songwriter and great musician, but are you really a great technical engineer also? I don't know too many people who do EVERYTHING great! Often, the more things you try to take on yourself, the more everything suffers. You need to seriously ask yourself if you have the time, determination, and technical abilities to learn this stuff and become a good recording engineer! Or, would you be better off spending that time practicing your singing, songwriting, and composing music, and letting someone else handle the production and recording.
Sure, you may think you are saving money by purchasing some equipment and doing everything yourself. That's what Guitar Mart and all the trade magazines want you to think... that you can spend just a few thousand dollars and instantly be able to record major label quality hit records from the comfort of your own home. Do you really believe that with very limited recording/technical experience, and a some very low budget equipment, that you are going to turn out something that sounds as good as a CD that was recorded in a multi-million dollar facility with millions of dollars worth of high end professional gear?
Don't buy into the hype that the Digi 001 is really "Pro Tools" either... it's a very limited version of Pro Tools that has limited compatibility with the real thing. The real Pro Tools is a hardware based system with a LOT of real time DSP processing power, whereas the Digi 001 system relies on the computer's own processing power and can't do nearly as much as the real thing.
Also, if you do a search on the pro audio newsgroups via Google (search the "groups" section on Google) for Pro Tools related articles, you'll find that most of the pro engineers out there don't think that Pro Tools sounds that great, and most of them are using it ONLY for editing parts, and they are mixing externally through high end SSL or other very nice consoles, usually going through much better sounding Apogee or Prism converters first (most of them don't like the sound of the Pro Tools converters) and sometimes even bouncing all the tracks back to analog tape first or a Sony multi-track digital machine.
It seems the only digital system that most pros seem to rave about the sound of is the RADAR system with the better converter add on options. The Euphonix R1 system is supposed to sound pretty good also.
The next thing you need to look at is your signal chain. Do you have some really nice microphones, pre-amps and compressors to run everything through? And maybe some better sounding converters that those on the Digi 001 (something like an Apogee PSX or even the Waves L2 would be a significant improvement). Do you have a good sounding acoustic space to record in? Do you know how to get proper signal levels set up and matched properly between different pieces of equipment? Since you are thinking of going digital, do you have a firm understanding of A/D and D/A conversion, sampling rates, word clock, dither, bit depth, etc?? Do you know computers inside and out enough to at least optimize your computer for recording audio, or add a new hard drive, defragment and back up your files, etc??
Contrary to what they marketing people want you to believe, this stuff is not Plug And Play! I have a degree in Electrical and Computer Engineering, and I sometimes wonder how the average musican copes with some of the complications that come up when trying to record with computers! I've seen all their pleas for help on various newsgroups and forums.
This stuff is NOT as easy as they want you to believe. Do you really want to take the time to master the technology (which changes every other month, so it's a never ending battle just to keep up) and sacrifice the time that you could be improving your musical talents instead? Many musicians get so caught up in trying to get a handle on all this technical stuff, that they lose their creative flow and by the time they get the system booted up and ready to record, the idea has escaped them or their energy has gone away.
I really believe that's the main thing any musician or artist needs to consider before diving into putting together their own studio is if it's going to REALLY save them any money at all, or if it's going to cost them much more than simply money in the long run. If you buy the gear and spend many months trying to get it all figured out and running smoothly, and then spend many more months trying to record your project, only to find out in the end that the sound quality doesn't live up to the big promises, then what have you saved over paying a real professional to get it right the first time? You've not only wasted your money, but also months or even years of your time.... time that could have been better spent working on what you do best! Seriously think about that!
The only possibly exception to this would be purely electronic musicians, where doing it pretty much all yourself is the norm... but most of these guys are already pretty technical minded guys to begin with, and most of them are not recording acoustic sources.
If you still want to give it a try with your own home setup, then I would suggest that you consider your home setup to be more of a demo studio to help you work out song ideas, rather than a place where you are going to be able to produce major label quality recordings.
If you insist on doing things at home, be prepared for a long and frustrating learning curve, especially if you are a total beginner to the digital recording world!
One thing I would do is to buy the best front end for your system that you can afford. Try out several high end microphones to find what works best for your voice and singing style, and couple that with the best microphone pre-amp you can afford (be sure to try out the combination of microphone and microphone pre-amp before hand as well since the microphone pre-amp can significantly affect the tonal quality of the microphone). If you can afford a really nice compressor as well, then get one of those. If you want to get some of that analog "warmth" you mentioned, then maybe consider some of the high end tube microphone pre-amps and compressors, and possibly even a tube microphone.
A Side note: "Warmth" is kind of misleading. In the analog world the "warmth" really comes from the fact that the high end frequency response of tape is not that great (you lose some high end) and often tape machines will exaggerate the bass response as well.... so, what you consider "warmth" is really just a lack of high end and an exaggerated bottom in many cases. However, if you record a very hot signal to tape (hard into the red) you get a bit of natural tape compression as the tape saturates and the signal begins to distort in a sort of pleasing even harmonic sort of way that we sometimes also associate with warmth. It's really just some compression and distortion, though. There are some digital processors that try to emulate this effect such as "Magneto" and Steinberg's "True Tape". Whether or not they achieve that is a matter of personal opinion. Many people don't think digital sounds warm because it captures the signal much more accurately with an extended high end and a non-hyped up bottom end..... However, the real sound of digital is all in the converters you use! Cheap converters on cheap sound cards and digital interfaces are going to give you a cheap sound that certainly isn't very pleasing or even that accurate. There is a reason that high quality A/D converters cost several thousand dollars... just like there is a reason that high end mixing consoles cost much more than the home versions. Good quality components and extensive design and testing to make things sound good comes at a price!
So, the other thing you need for your front end are a set of good A/D converters.
If you are willing to shell out at least $5000 to $10,000 to put together a great sounding front end with a great microphone (or two), a great pre-amp and possibly a compressor, and some really good A/D converters, then you have a chance of recording something with good enough sound quality that it could be used on a major label release.
You'll also need the proper space to record in! You don't want nasty reflections from hard surfaces that are too close to your microphone causing phase problems and other issues with your recordings. You need an acoustically great sounding room where you can set up and not be too close to any walls or other surfaces, or else you need to set up a really dead space with minimal refelctions to record your sources very dry and add ambience later.
If you can achieve these things, then you can certainly produce some decent sounding demos from your home. If you have a great front end to your system, and you can master the recording process, then you may be able to capture some great sounding performances in your home, and then take your raw tracks into a big studio with higher end equipment to do proper mixing and mastering.
That would basically be the second suggestion... if you really want to record at home, then get yourself set up so that you can capture your vocals and other instruments with the best possible quality you can. That step is not quite as hard as trying to do EVERYTHING (including mixing and mastering) with a simple computer digital recording setup. In the long run you may save money this way and may deliver better performances if you feel more comfortable working by yourself in your home. Then, you can simply take your tracks into a really nice studio to overdub other instruments (like real drums, piano, etc.) and do a really professional job of mixing and mastering.
Mixing is one of the hardest things to get right, and trying to mix your songs with a simple computer based system is most likely not going to give you the results you are looking for. If you don't already have extensive experience with mixing, and don't have a firm grasp of EQ, compression, and other types of processing, then you really should leave the mixing for the professionals. Even if you do think you can mix it yourself, you still won't be able to do as good of a job on your simple computer setup as a real professional can do on a nice mixing console in a control room that is acoustically correct.
The bottom line is that, in my opinion, most musicians and artists are much better at the musical side of things than they are at the engineering side of things. There are a very rare few that can handle both sides at the same time and still turn out quality product. Most of them waste their money on home recording gear only to end up being frustrated with all the new stuff they need to learn and then even more frustrated when they can't immediately get quality results (learning to be a good recording and mixing engineer takes a long time... just like learning to sing or play an instrument... you just don't read an instruction manual and then suddenly start cranking out great sounding songs).
In the end, though, it's the song and the music that is the most important. People will always respond to a good song, even if the recording isn't perfect quality. However, bad recording and production can certainly be a distraction and can make a big difference in how the listener responds to a song. A great song with great production and recording will have a much great impact on the listener overall.
Good luck with it! And, remember, don't buy anything without giving it a thorough test run first! And, don't believe all the marketing hype!
The following is a response of mine to some positive comments I received about this article, and expands upon what is written above.