Some would argue that "good quality audio" and built-in camcorder microphones are an oxymoron...
Things to look (out) for:
1) Don't do DVD-media camcorders. First choice MiniDV tape; 2nd choice hard drive (my opinion - due to achive-ability of tape - though I would expect Whizkid to weigh in here - he likes the hard drive camcorders).
2) Don't spend your entire budget on the camera - You should also get a tripod (or monopod), and external mic (optional, but strongly suggested) and an extra high-cap rechargeable battery... and a carrying case. Depending on where you get the camera, the store *might* throw them in, or have a "starter kit".
3) Presuming you have available hard drive space on that computer, you have a good rig for editing standard definition video. If you don't, consider adding another internal drive (is space is available) or an external FireWire or USB drive.
4) Panasonic, Sony, Canon... not in any particular order, but the current crop of camcorders from these folks will generally do well in the price range you indicated (minus the above suggested accessories)... Many of the lower-end Sonys don't have a mic-in jack, exactly, but they do typically have a proprietary hot-shoe where you can connect a Sony proprietary mic. The low end Canon and Panasonics may have no mic-in at all but when they do, they are noted and there are lots of mics to choose from. In any case, you don't need to get it right away, but just know that after you have used an external mic, you probably won't want to shoot video again without it. Yes, a decent external mic improves audio that much.
5) The MiniDV tape based camcorders will typically use FireWire to transfer video from the the camera to the computer (and back). The manufacturers do not include a FireWire cable in the box. You will need to buy a 4-pin-camera to 6-pin-computer FireWire cable. The included-the-box USB cable will allow you to transfer stills off the memory card only. You plug the camera in, launch the video application and import the video. Transfer time is real-time... 1 hour video to transfer = 1 hour of transfer time - but the archive (tape) is already there so no extra step for archiving.
6) The hard drive based camcorders generally transfer using USB. Plug the camera into the computer, and the computer mounts it like any other USB hard drive device - drag the video files over to the computer and they copy... there is no archive - so either you burn the video (no editing) to a disc or after editing and you trash the video in the camera hard drive plus you trash the video on the computer hard drive - if you want to go back (and have not burned the raw video to disc stashed somewhere), the data - video - is gone.
7) I do my video editing (high definition) on a Macintosh using FinalCut Pro or iMovie. I have heard and read that in the Windows XP environment MovieMaker 2 is included and is rudimentary but can do a the job. I also understand that (for additional $) Sony Vegas 7 is quite the editing powerhouse - and the various CyberStudio component applications are quite good - but I have never used them.
Use name brand tapes (I use Sony and Panasonic MiniDV tapes) and discs (I use FujiFilm and Memorex Single Layer and Double Layer DVDs).
Congratulations on your baby boy (mine's in college - the time goes REALLY fast). Have fun. It is a GREAT ride.