The only downside to using the mixer is that you will end up with a single stereo track recording of both you and the backing track. It's not really a problem, only a minor limitation to keep in mind. Basically, if you want the ability to adjust the levels of the drums or the backing track independent of each other in the mix, you won't be able to. You need to record them separately if you want to do that. If you're good at mixing things the way you want prior to recording, than you should be good to go. However, if you want to overdub on that track you will be in the same position you are currently unless you dump that audio file to a tape or CD, then play it back again through the mixer while you record new stuff. That may not be a concern of yours though since your current needs are just overdubbing to backing music.

As far as monitoring, regardless of whether you're going direct or using a mic, if you are over dubbing you will still need to monitor what it is you are tracking over. Whenever I record I have the headphones on so I can hear what I've done before, and if it's the first track, then I am hearing the click.

You don't need a fancy interface. The Presonus one I linked to is far from fancy and will cost about the same as a small mixer. It uses the same audio drivers and mic pres as the Firebox and Firepod, but levels are adjusted via software rather than manual controls (that's where they saved the money). It also has fewer i/o's. If you get a firewire (or USB) audio interface, you won't need a separate sound card. That interface acts in place of the sound card. I use nothing but my Presonus Firebox (which is a great firewire interface for someone not needing 8 inputs, but more than a stereo pair).

The main reason I suggest a better sound card or interface is that it upgrades the audio drivers on the computer (very important), aside from giving you the proper inputs and connection to the computer as opposed to using a little adapter to plug into the mic or line in on the back of the motherboard. Now don't get me wrong, those little jacks and onboard audio drivers (on some motherboards) will get you by to an extent. I used to use that stuff years ago. I've gone through two top of the line Sound Blaster cards over the years as well. Once I got my Firebox I realized how much of a difference a real interface designed for recording makes. Ten years ago when I started messing with audio on computers you couldn't get a budget interface. Now they are all over the place.

Regardless, good luck with your decision and I hope it helps you get the gigs you want.

One thing you may not be aware of is you are facing a two-edged sword.  You are listening to yourself the first time and also dealing with recordingitis.  Remember the first time you heard your recorded voice?  Do I really sound like that?  Recording also increases the pressure on you and can cause you to tense up and not play as well as you normally would play.  The only way to overcome this is to record yourself often and let others critique your work until recording is no more stressful that practice time.  So, for anyone recording themselves the first few times, go easy on yourself when you listen.  I am sure you are better than you will sound on the tape. 

Definitely! I can practice something so many times and feel really good about it, but once I hit record I have this natural tendency to just tense up and overly think it. Part of relaxing can be your atmosphere... the lighting, the wall color, decor, etc. I can't wait to paint the walls in this room to help me feel more cozy.

The headphone mix is important too. That's why having the ability to create a separate headphone mix from what is actually being tracked is so great- even more so in a band setting where each band member wants to hear something slightly different.

One of the ways I just Forced relaxed playing is: to play some jazz.

Might sound weird.  But, for me, jazz is much less about power and arrangement, and much more about listening and interacting.  That naturally forces me to relax, so to speak.

I just had a very pleasing play through some jazz tunes.  It's official - I'm sparing my sticks from the wood chipper.   

Stay tuned for the next episode of the daytime soap:
"As Frank Finds his Way"...