Willing to spend around $500 for the camera.
The Canon HV20 is a fine camera.
Read
THIS discussion about cameras and making movies.
Plus is a good mic nessessary? or can I get a good camera with a good mic attached? Willing to go over 500 if camera has good mic.
A good mic is essential. Most beginners do not put enough effort into
audio and their movies suffer.
The further away the mic is from the actors, the higher the volume
needs to be. The higher the volume, the more “noise” you get. Your
goal is to have a very high signal to noise ratio - more signal
(the dialogue) less noise (the background). Even a very good,
expensive Sennheiser mounted on the camera will pick up a lot of
background ambiance because it’s far away from the actors.
I saw a short film on Youtube with this camera & sony vegas pro and was very impressed. Take a look
Impressive.
They could have used a Flip (or even an iPhone) camera and iMovie or
WMM and it still would have been good. No dialogue so they didn't need
a mic, no lighting, all auto focus. What made that movie good was the
talent of the guys. Good editing, creative shots, nice pacing and good
sound effects. They used music they didn't have permission to use, but
that's okay for a "test" film.
Do you have the talent and creativity to make a movie like that? If you
do any camera in your price range will be fine. I'm serious; go to any Best
Buy with $500 and pick up any camera and with talent and creativity you
can make a movie like that one. It wasn't the camera or the software that
made that movie impressive - it was the people making the movie.
Get the Canon and start shooting!