|If you wanted to do it real cheap, you could always go the Strobist route with hotshoe flashes mounted off-camera. Three flashes, lightstands, umbrellas, and misc. gear would probably be under $400, especially if you got the flashes off eBay. They won't have the raw power of big studio lights, but they'll work just fine for single person or smaller group portraits. And they have the perk of being highly portable, so you could use them outside or at other locations without much hassle. (Being a broke university student, this is how I did it.)
I've also heard a lot of new-to-studio photogs talk about Alien Bees strobes, which are full-size studio lights, but are of course more expensive. Either way you go, part of the cost you need to consider is how you're going to trigger the strobes - either have cords or a radio system, which will naturally add more expense depending on if you want the pricy PocketWizards or a cheap eBay system.
What you said about not being a studio person and prefering candids, I think there's a lot of potential in that. I tend to think that even in a studio, the best shots aren't "staged" but just happen between the model and the photog. If you get the person comfortable enough and both get wrapped up in what you're doing, you may find that you can still get a natural look, instead of something that's obviously posed. And best of all, you'll get it with good studio lighting.