Amplifiers are generally split into two parts. Preamp and power amp.
The preamp is the signal processing part that lets you plugin in additional sources such as tuners, CD players, etc. It may or may not let you fiddle with treble and bass settings (depending on the preamp).

The power amp drives the speakers. Unless you have a passive preamp (one that has a power supply built in), you will need a power amp with your preamp. If you do have a passive preamp, that could be part of the reason your sound quality is degraded. Separating the power from the preamp allows for better signal processing resulting in clearer sound quality.

In most cases, you can get decent, clear quality from a microphone if you use the right type of mic and have the right sort of housing/stand for it. Quite a few people are unaware that there are different types of microphones used for different needs, so the fact you know that makes it easier.

The most commonly used are Dynamic and Condenser microphones. Dynamic are generally cheaper and less responsive, they do handle live recording quite well (especially if you want to use it in a studio environment with instruments that have a high attack level such as drums) but for most needs they're alright.

Condenser microphones are generally geared more towards the professional user. They're much more responsive, the quality is ten-fold better, and they often have high-pass filters, bass roll-off control, etc.

As I mentioned about the housing, I use a Condenser mic, a spit guard and a custom built rig to house the stand/mic in. It's a simple stand that lets the microphone sit inside an enclosed space with soundproofing around it. I've got a Creative Sound Blaster X-Fi Titanium soundcard (which made a huge difference in the production of music, not sure it'd help much in the recording stages tthough).

When I'm recording, all I need to do is capture the noise print (leave a 3 second gap at the start when you record so you can get a good, quiet sample) and apply it to the entire sound capture. 99% of the time the quality is crystal clear.

All in all I think I spent less than ?100. Hope this helps you decide.