I would mention the Elemental kit, but I know there's mixed feelings about it.I'm also looking into buying some studio equipment, have around £400-500 to spend in total, including a backdrop.
There was another person in a similar situation to you, i'll see if I can find the thread..
*EDIT*
Here we go, read this thread... There's some useful information in there, I also made a good suggestion which the OP tried out.
http://www.talkphotography.co.uk/forums/showthread.php?t=115278