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I have an ATEN 2-Port USB KVM. It accepts PS2 keyboard and mouse up front, VGA and USB in the back. Its actually a USB 2.0 hub. Keyboard and mouse are passed to the machines via USB, so you just have one USB cable and one VGA cable going to each machine. I picked it up on eBay for $26, new.
As for audio, I'm getting ready to tackle that problem as well. I haven't found a switch that I like yet for audio, so I'm going to build one.
I'm going to get a 3-pole 4-position rotary switch (make sure to get a non-shorting switch), a knob, 5 3.5mm stereo jacks and a plastic project case. Audio out from the machines will go into the unit, and the output from the switch will go to my speakers. I'll use the extra inputs for an FM radio, etc.
Cables and all, I think the project will run me around $20 (parts at mouser.com). You could probably do it for less if you just bought enough parts for only two inputs, but expanding it out to four inputs isn't go to add that much to the cost.
Another thing that you could try is to channel the line-out of machine two into line-in of machine one. Then just have machine one always on the speakers and adjust the level using the mixer. I prefer the switch method over this though.
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