+1 - Most home gyms eventually become clothes racks after a few weeks
I have a home gym, cage (attachments for dips/pullup handles), oly weights, bench, pretty much the ideal setup... currently it's got clothes hanging off it (err... my wife likes to iron near it and well... space is limitted).
A cage setup takes up as much space as most machines, probably more in a lot of cases since it doesn't fold up (and probably the better machines out there wouldn't fold up either).
I had a Precor S3.21 (or something similar to that name) that I used the crap out of for about 3 years, I eventually traded it in for the oly weights (300 lbs starter set and a weight rack and ez-curl bar), and bought the cage I have now... I have to say in retrospect I have hardly used the newer equipment compared to the machine I had, I'm sure there is more to it than this, but I think the biggest factor was that the machine was much more convenient to use than free weights. I could up the weight 5/10/15 lbs (it was a graduated stack) and switch between a lot of exercises easily, particularly going from bench to mid-row or other alternating exercises, it was a matter of pulling a pin and putting it back in again or squeezing a handle to adjust the bar height, I didn't have to do much other than maybe sit on the bench a different direction or stand up and use a diff attachment for most exercises.
In comparison with the weight set to change the weight I have to squeeze some fairly stiff clamps, on each end of the bar and slide them off, then I have to drag weights around, which is particularly tedious because I am limitted on space and one side of the bar is close to a wall, my own personal setup sucks here but it'd still be a bit of tedious work. Now it's kind of retarded to complain about having to lift weights and stuff while weight lifting... but it takes time and the weights individually aren't that much of an issue, but the time it takes to switch weights on the bar or bar height for a different exercise (you have to unload the bar completely adjust the position and then load it back up) tend to limit the routines possible... most of the time I end up doing a compound movement and mixing in something else that I can do using my ez-curl bar, like bench and military press, other than initial warmups I tend to avoid adding/dropping weight if I can and just do more/less reps unless I completely miss-judge how much weight to use. For days when I am doing deadlifts the cage is just in the way, I take my bar into the next room (where there is more space thanks to not having a weight lifting cage in it) to do them, and usually alternate pullups (off the cage) with deadlifts etc. On the machine I had deadlifts were not practical and squats were bad... to the point I'd have to say I think they are a bad idea to do on the machine (despite the fact the machine had specific attachments etc to do squats with... Maybe it's better for a taller person).
The cage/oly weights/bench setup is supposed to be better based on more stablizers getting used and cost efficiency, but I have to say I don't think that's been the case for me, I think that I might have paid about half the price (with the bigger stuff being used so discounted a fair amount) I paid for the machine I bought new, but I just haven't used the oly setup nearly as much as I used the machine.
I'd love a set of adjustable dumbells, the normal dumbells are pretty handy too but I haven't bought any due to space, but the price tag on the adjustable types is insane to me, I saw a set at walmart and was tempted... the price was a bit high but then I realized oh crap, that price was only for a single dumbell, I'd have to buy two and I think the highest weight was only 53 lbs or something fairly limitted.
Anyway, good luck with the home gym, you are probably better off to go to a regular gym and play around with various home gyms in fitness stores to see what you like, or keep an eye on craigs list and garage sales, no matter what you buy, if you buy it new you paid too much...
.. so lets help me here 
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