pain.net, of course.
For hardware, I'd recommend the graphics tablets made by Wacom, my sister is an illustrator of shorts and it works great for her, but software, I'd say Photoshop or Autodesk sketchbook, which are great in combination with a tablet.
I remember someone suggesting "bamboo" or something? Ring any bells?What about Adobe Illustrator / Paint Tool Sai?
It's the bamboo tablet. I have done no research what so ever into the subject.