heh, in this age and with the technology available, its really really hard, not to do any recording with at least, 44.1khz 24 bit sampling rate.
Forget bout the demo. Make full use of the technology available, go for a proper cd quality recording. Demo is a thing of the past when recording tool/gear aint as wide spread as now.
For the bands, dont even need to be tight playing together, as long as individual members can follow metronome and getting all the parts lay down. Heh, post production can cut and paste, quantize what so ever. Just make sure the sound is good in the beginning before recording.