Don't cut corners
The one area that no film maker can afford to cut corners on is sound recording.
Without clean sound, any end product will be very compromised and in my experience the one area that shows the difference between an experienced film maker and someone just starting out, is the sound.
Unlike the pictures, there is very little you can do in post production to fix sound problems.
For anyone working digitally, the sound recording into your camera will be as good as any external recorder, providing that you have three things, a mixer, a good external mic and an experienced sound recordist, with good ears. If you are working on film, it would be criminal to record on anything less than dat or a hard drive recorder. You could use mini disc, but you get a phenomenal rate of compression on mini disc and most sound recordists only use them as a substitute for cassettes.
If a person like myself owns a lower end DV camera but wants a more professional quality audio then how can that be achieved using inexpensive equipment? I see my Panasonic GS120 has a external mic in. Is there a boom like mic I can purchase that will cut out background noise but still pic up people talking. I don't mean a boom mic that someone has to stand and hold over people but something that can mount on the camera itself.
In order to isolate people talking, you have to use a mic that has decreased sensitivity and is highly directional, or in other words, a mic that works best if it is very close and pointing directly at the person speaking. By it's very nature, a mic mounted on a camera can't do that. Unless you are doing documentary, where a boom mic may be too slow and too intrusive it is always going to be better use a boom, held by someone and mixed by a good sound recordist.