A lot of good advice so far. My 2 cents...
Larry, that Craigslist lathe sold for nearly that price when it was new in 2001. It's not a bad starter lathe, but I'd offer the guy about half that price. At $325 he's within $50 to $75 of a nicer new one with a warranty. (Or an even better used one.) Also, this is a chance for the wifey to get pulled into the vortex. Most wifeys like new stuff.
Ninh, if you're planning to just turn pens and other spindle-type projects, a stepped-pulley lathe really isn't much of a hassle. I suspect a lot of pen turners seldom if ever change speeds on their lathes. If you want to get into bowls and hollow forms, then a variable speed is definitely a welcome addition. But as has been said, I don't think you'll find a usable lathe with variable speed in your current budget. If you can swing an extra $150 or so, the Nova Comet Billy linked to has a good reputation last I heard. I've heard mixed reviews of the
Turncrafter lathes from Penn State, but they do have some VS lathes in the $350 range. (Some of their "Penmaking Starter Sets" look like a pretty decent deal.)
For tools, as I see it there are three basic levels of quality, and which one you choose depends on how much you can (or want) to spend. There's a definite price/performance relationship. In general, the more expensive tools will hold an edge longer, which really makes the tool more pleasurable to use. Tools from any of the groups can get the job done. I own and use some from all three groups.
The bottom of the heap - but still very usable tools - is the
basic Harbor Freight HSS set. These tools have launched a bazillion woodturners. For about $30 to $50, depending on sale prices and coupons, you can get a very workable set of spindle turning tools. (No bowl gouges though, and it's not safe to use the spindle or roughing gouges in the HF set for hollowing a bowl.) It's not great steel, so you get plenty of practice sharpening if you use HF tools, but they are great bang for the buck. They also have
a better "professional" set for a bit more money. I still use a couple of the tools from my basic HF set. The diamond parting tool works great for me and I've never felt a need to replace it. The other started out as a skew, but I re-ground it into an angled scraper for cutting a slight dovetail on a bowl tenon. I use that HF tool on pretty much everything I turn in the chuck. There are possibly other sets in this price range of equal quality, but I've not heard of them. Beware of no-name Chinese tools at the flea market or garage sales. If you're gonna go budget, go Harbor Freight.
The mid level of tools are the
Benjamin's Best and similar brands. Better steel, and they hold an edge longer than the Harbor Freight steel. Benjamin's Best also sells bowl gouges...that's what I started doing bowls with. Benjamin's Best is another good bang for the buck. Artisan tools from
Craft Supplies USA seem to be similar quality, although I've not used them. A slight step up from there in price - and a bit bigger one in edge-holding - are the Henry Taylor tools that Craft Supplies sells. They are a good value, comparable to some of the top-tier tools. Their Kryo line is very good price/performance, but they are also pretty much in the next tier price-wise. I have some Henry Taylor tools - both Kryo and non - that I use quite a bit.
At the top level prices, there are a lot of good brands. Sorby, Crown, Hamlet, etc. make nice tools. They are high-quality HSS. I've not had enough personal experience using them to know how long they hold an edge, but they all have good reputations as professional-level tools. They are also priced that way.
For about the same price (or perhaps a bit less, depending on the tool) are the
Thompson tools. As far as holding an edge, they are in a league of their own, in my opinion. (A lot of the top pros have the same opinion.) That's because they are powdered metal, cryogenic tempered steel as opposed to HSS. In my opinion, they are at the peak of the price/performance chart. There's one other company that I know of (and the name escapes me) than is selling powdered metal/cryo gouges, and they are nearly twice the price last I looked. Another advantage that Thompson tools has (again, my opinion) is if you have a question about any of the tools, you can contact the guy in Ohio who makes them. Not some company that imports them. One consideration with the Thompson tools is the fact that they come without a handle, so that should also be factored into the cost. A handle can cost anywhere from almost nothing for a shop-made wood handle to over $70 for a high-end metal handle. I like using padded metal handles with my Thompson gouges because I can take the shank out of the handle for sharpening. I use a sharpening jig, and it's easier to swing just swing the shank around than the whole thing, handle and all. I like the handles from from Monster Lathe Tools, but there are several other good ones available, too. Being a machinist, Ninh could probably whip up his own in an afternoon.
Even the lowest tier of tools can get the job done. And as Ryan said, it's a good idea to start with some less expensive tools, because at first you're gonna burn up a lot of steel at the grinder. (And that's a good thing. Sharp tools are a necessity.) But once you have the sharpening down, and are pretty sure you plan to stick with turning, my suggestion is to go with the best ones you can afford.
OK, that was probably a lot more than 2 cents.
