I think any musician that's serious about playing music has at least one decent microphone and some sort of recording setup (M-audio stuff is a low-cost way to

I think any musician that's serious about playing music has at least one decent microphone and some sort of recording setup (M-audio stuff is a low-cost way to get into recording). Hearing yourself play is also invaluable towards learning. The second issue is real and since I know nothing about how to solve it perhaps the idea is dead in the water for now. But anthonyb's suggestion of recording all the tracks separately and allowing the musicians to mix them in post might be one way of going around this.