You can make quality demos at home using MIDI and your computer or the nice hard disc multi track machines. ADATs are now available for less than grand. So you can do the work at home, buy all that equipment and learn how to run it, or pay for studio time. Many musicians I know started recording at home and accumulated enough equipment to have their own studios. I record at home unless it's a project that I intend to release to retail.
Studios vary widely in price, atmosphere, and equipment.
There is a lot of equipment available to consumers that will make a nice video. The cameras are better and digital is a convenient way to go. The only problem we have run up against is getting a quality sound out of that little microphone. If your budget can afford it, better results come form recording the music in your studio, then lipsinking in a more controlled environment. Your tape will most likely have to be mixed, cut, pasted, and sweetened.