For versatility the Extigy is very nice. Just plug it into any USB and install the drivers and you are good to go. A good friend has one and I must say I'm impressed (despite it being from Creative). It sounds pretty good, is extreemly versatile (it can easily go from computer to computer), but it will cost you more. Personally I think it should be a USB 2.0 device as this would give it better performance in games. But for audio transfer it is acceptable.
An internal PCI sound card is a better alternative however (as cdorders pointed out). It may not be as versatile as an external device (like the Extigy), but it may (depending on your choice) be cheaper. You will have to open up your computer and have a free PCI slot on it. But it's really not that difficult to do though. You could have it professionaly installed, but this will up the costs. A Turtle Beach Santa Cruz would be an excellent choice for this option. It's probably the most problem free sound card out there (especially under WinXP).
There are better (and more expensive) sound cards out there that will give you better sound quality transfers...much better depending on your budget. These are one's cdorders is referring to. But unless you have a high end sound system you will be wasting your money. How "good" is your system and how much do you want to spend...$50 or $1000 ? Again...this is only if you are willing to put up with an internal solution.
Oh and for the scratches on the records, you will want a good sound editing proggie. More on that later...first you must pick a device.