If you are just taking pictures of small objects, build yourself a light box from some PVC tubing. There are dozens of sites with examples. This is one that I grabbed off the first page that came up from google.
http://www.pbase.com/wlhuber/light_box_light_tent
As far as cameras goes. If you don't know how to use one fully, do not get a DSLR. You will waste a lot of money and honestly the DSLR will probably not produce as good of photos as a point and shoot. The only feature you will really need is a good white balance control or the ability to take RAW photos and do your white balance on your PC.
As far as specific camers goes, I would suggest you go to an electronics store and get a feel for what style you like and go from there. For example I prefer a larger bodied camera that I can get a grip on but, my wife prefers the much small camers.