First bit of advice: MAX OUT YOUR RAM. Seriously, 640MB?? Even on older machines that is BARELY enough to run Tiger.
Second bit of advice: if you're looking to start inexpensively, I would suggest (AFTER you've upgraded the RAM) looking at Garageband. It does a very nice job of working with pre-recorded loops *as well as* recording your own instruments. Lots of musicians I know use it to lay down a beat that they can then "play along to" for practice and for getting ideas down. You can then pass on those audio files to any other program if you need to later.
When you have money to make a more serious investment, you'll want to look at something like Logic Express (or just full-blown Logic), Pro Tools, etc. that kind of stuff. But I'm a big believer in "keep it simple" at first, and Garageband (part of iWork, I suggest the 08 version, sadly 09 requires more than you have) really fits the bill.