Analog output? Wow. Going seriously old school?
Everyone I know uses a USB mixer with the editing software of their choice, (I use Garageband, CuBASE, and Reason), and records the instruments and then mixes them, or just cleans up an ensemble recording.
Don't know anything about the old way, sorry.
But for acoustic instruments, I would definitely go for a condenser mic. They have way more range and better response for picking up all the subtle nuances. You can also get small condenser mics that go right on the instrument itself, good for picking up a quieter instrument.
Also, some music stores will rent you expensive condenser mics for a session, so you don't have to buy them.