SB Live is good, I use it, it's not the best but it's good.
for the stuff you do with your computer, those components should be just fine, I wouldn't change a thing. I mean, don't spend any money if thats all you use it for
Use Adobe Photoshop Elements or Jasc Paintshop Pro 8. They're not free, but good programs. I don't know if there is any free decent image editing software out there. Microsoft Picture Editor has very limited function and so does MS Paint. Those software listed above shouldn't cost that much either.
yeah, free is a tough order. you'll have to pay something for a good image editor. they sometimes come with digital cameras or printers, but that isn't really "free" since you paid for the device too....lol