Q:

Is it better to use a DI unit or USB audio interface to connect guitar to PC?

I'm looking for an economical way to play my guitar and possibly record on my computer without purchasing an amp. I'm hoping this will save me some money and still produce reasonable quality output for casual play and experimentation. My thought is, instead of buying an expensive Line 6 modeling amp or effects processor, I could do most of that in VST software with plugins (e.g. Guitarix, Audacity, Ardour, etc.).
However, I still need to connect my electric guitar to my computer (which currently just has onboard sound). So far, it looks like my cheapest options are:

A simple 1/4" TRS to 3.5mm cable — $3.56
A USB audio interface, like Behringer UCG102 (couldn't find a Firewire interface that was less than $50) — $39.99
A cheap passive DI, like the Pyle-Pro PDC21 1/4" Instrument To Balanced & Unbalanced (1/4" / XLR) Direct Box, plus a 1/4" TRS to 3.5mm cable — $10.12 + $3.56 = $13.68 

The first option is obviously the cheapest, but the direct box + adapter is still quite a bit cheaper than the UCG102, and I'm wondering if I'll be trading quality/versatility/ease-of-use for the savings.
As a side note, the PDC21 has 2 outputs, a 1/4" TRS and a balanced XLR, but the 1/4" TRS is labeled "Parallel Passthrough (Link)" — does that mean the 1/4" output is just the original high-Z non-line-level signal?
Or do I need an active DI (the Stellar Labs DI-50 claims to have both 1/4" TRS and XLR inputs and outputs for a mere $24.99, but there are no reviews of it) or some other 4th option?

A:

The purpose of a direct box is simply to take a quarter inch guitar line signal and convert it to a balanced signal that won't degrade over the longer run to the sound system.  A DI doesn't do anything that can't be done with a decent recording interface since you aren't going a long distance with the signal.
You are best off to get an audio interface that supports a quarter inch guitar level input and plug in to that directly.  The audio interface should have the necessary pre-amps to capture the direct signal from the guitar as long as it is designed to take that level of signal.
The trick to doing analog cheaply is to get digital as fast as possible.  Every additional analog component is a chance to lose quality and another device that has to be spent on to increase quality.  Going straight to digital means you only have one bottleneck to worry about.  The main reason people sometimes don't is that they prefer the sounds of analog effects and pedals, but that is the more expensive option.

A:

You won't get quality for cheap...
None of those options are really going to have the best audio quality. Options 1 and 3 both involve converting your guitar's output to 3.5mm and presumably using your computer's onboard line-in, which is, in all likelihood, not that great-sounding of an input. That leaves option 2, but super-inexpensive audio interfaces like that tend not to sound that much better in my experience.
...but that might be okay
That said, if you just want to play at home and maybe do some hobbyist recording, the quality is probably plenty good for your purposes, and you can always upgrade later if you decide you need to.
I'm not sure a DI box will help you. As I understand them, the main feature of a direct box is to run your guitar into a balanced input, such as an XLR input. But you'd be using a DI box's 1/4" output (which, for those DIs, is unbalanced as far as I know). You don't need long cords since I presume you're in the same room with your computer so even if you could balance the line, I don't think it'd buy you much. I don't have a ton of experience with DI boxes though, so take this advice with some caution.
That leaves a cable, and an interface. Honestly, if your guitar has a strong enough signal to work in a line-in port, either will do, and it's down to which you prefer. The interface has a nice headphone out and is mostly guaranteed to work with your guitar, but you have to deal with the configuration of another audio device on your computer. At that point, it's your choice.

A:

Until the last year or so I ran my guitar (via effect pedal) straight into the line input jack. I was/am using a creative sound-blaster card which offers 2 x 1/4" inputs. I don't see any real problem with this at all if leads are fairly short. Folk say my stuff sounds good quality (Can't vouch for the singing though)
Now I have a small Yamaha 10 channel mixer that replaces the effects pedal so that I can also use my phantom powered mic. The output of the Yamaha goes into the same socket of the sound-blaster. I also use it for my bass guitar too.
My advise is try the really cheap 1/4" converter and if you have problems such as poor signal/noise ratio use a cheap preamplifier.
Footnote - I don't use fx pedals any more because I use VST effects.

