Another fan of NoteTab here...very handy software. Before you start messing around with wysiwyg editors, you really should know html. But then, I'm kind of a dinosaur in that respect...I firmly believe in hand coding.
Graphics wise, I use Fireworks. Image editors...I use a couple...SuperJPG (hard to find now)...and Ulead Smartsaver.
You can easily get viable software to do free sites for a whole lot less than $1200. With hand coding of html, you can probably get all you need for well under $100
