If you’re looking for a basic setup, I think that would work. Keep in mind, however, that if you want to use more than one mic, you’d have to use two different cable types - one XLR (look at the top input on the first channel in the pic) and one RCA cable; you’d probably not notice much audio quality difference between the two. Also, for two pair of headphones you’ll need to use a RCA splitter at minimum; this means that you’d both have the same audio level in your headphones, however.
I spent too much money over all but what I’d recommend is what we used: an Alesis USB mixer. This is the one we use:
http://www.amazon.com/ALESIS-MultiMix-8USB-Audio-Mixer/dp/B00076SCXE/ref=sr_1_2?ie=UTF8&s=musical-instruments&qid=1255397184&sr=1-2
It’s going to be a more expensive setup, but It will give you more control with the levels, more XLR inputs and more capability for additional guests. You could probably find it cheaper on ebay.
The downside here as well is that it only has one headphone jack. You probably remember we used a chain of splitters on TBR but that gave us problems with headphones going out; not necessary with just a 2-split. However, for our issue, to fix that, I bought this amplifier:
http://www.guitarcenter.com/PreSonus-HP4-Discrete-4-Channel-Headphone-Amp-102226354-i1125342.gc
That allows people to control their own headphone levels and is generally better quality. Again, check eBay.
The first mics I bought were these in a package, which apparently is not available anymore. However, again, you can probably find these used cheaper:
http://www.guitarcenter.com/MXL-MXL-V63M-Condenser-Studio-Microphone-770694-i1126976.gc
Past that, buy some pop filters or DIY some to get rid of your plosives.
For software, we use Audacity (free) to record and then Gigavox Levelator to even out the levels in post.