Sorry for the Windows developers out there, this solution is for Macs only.
This set of applications accounts for: Usability Testing, Screen Capture (Video and Still), Version Control, Task Lists, Bug Tracking, a Developer IDE, a Web Server, A Blog, Shared Doc Editing on the Web, Team and individual Chat, Email, Databases and Continuous Integration. This does assume your team members provide their own machines, and one person has a spare old computer to be the Source Repository and Web Server. All for under $200 bucks.
Usability
Silverback
Licenses = 3 x $49.95
"Spontaneous, unobtrusive usability testing software for designers and developers."
Source Control Server and Clients (multiple options)
Subversion = Free
Subversion is an open source version control system.
Versions (Currently in Beta) = Free
Versions provides a pleasant work with Subversion on your Mac.
Diffly = Free
"Diffly is a tool for exploring Subversion working copies. It shows all files with changes and, clicking on a file, shows a highlighted view of the changes for that file. When you are ready to commit Diffly makes it easy to select the files you want to check-in and assemble a useful commit message."
Bug/Feature/Defect Tracking (multiple options)
Bugzilla = Free
Bugzilla is a "Defect Tracking System" or "Bug-Tracking System". Defect Tracking Systems allow individual or groups of developers to keep track of outstanding bugs in their product effectively. Most commercial defect-tracking software vendors charge enormous licensing fees.
Trac = Free
Trac is an enhanced wiki and issue tracking system for software development projects.
Database Server & Clients
MySQL = Free
CocoaMySQL = Free
Web Server
Apache = Free
Development and Build Tools
XCode = Free
CruiseControl = Free
CruiseControl is a framework for a continuous build process. It includes, but is not limited to, plugins for email notification, Ant, and various source control tools. A web interface is provided to view the details of the current and previous builds.
Collaboration Tools
Writeboard = Free
Ta-da List = Free
Campfire Chat for 4 users = Free
WordPress = Free
"WordPress is a state-of-the-art publishing platform with a focus on aesthetics, web standards, and usability. WordPress is both free and priceless at the same time."
Gmail = Free
"Gmail is a new kind of webmail, built on the idea that email can be more intuitive, efficient, and useful."
Screen Capture (Video / Still)
Jing = Free
"The concept of Jing is the always-ready program that instantly captures and shares images and video…from your computer to anywhere."
Lots of great responses:
TeamCity [Yo|||]
Skype [Eric DeLabar]
FogBugz [chakrit]
IChatAV and Screen Sharing (built-in to OS) [amrox]
Google Docs [amrox]