You need a Mac, no question. You also need an iPhone or iPod Touch to evolve, although the simulator is pretty good, it is not perfect. I have some sample code that works fine in a simulator but doesn't work on hardware. The equipment must also be modified to add development keys to it, so there is a certain risk of using a real iPhone. Many people say that it is safe enough, but I myself smoked and buy an iPod Touch for development. Keys must also be installed on your Mac and integrated into Xcode - and it's hard enough to get right even with standard Apple setup. Xcode is a free and really pretty decent IDE.
Therefore your minimum requirements
Intel Mac works with the latest Mac OS. The cheapest option is the Mac Mini - $ 599, although you can probably pick it up on Ebay, which will work just fine for $ 400 or less.
iPod Touch (or iPhone if you need camera / phone features for your application) - $ 229
Apple Developer License, so you can get the keys you need - $ 99
To emphasize, you absolutely need to check the code on real hardware and the amount of pain you will go trying to use anything else, but Mac and Xcode will easily buy the cost of buying a Mac.