I want to buy some audio-recording gear for use in various media
applications like audio engineering for film, or sound-effects in
general. I have a medium monetary limit (a cost less than $500 would
be nice)
I am new to this field; I'm usually a visual artist.  What sort of
portable options do I have?

what is the best dynamic small-diaphragm mic?

With a DAT out of the question, what would be a good minidisc recorder
for the aforementioned field work?

Can I afford a better setup than a dynamic mic and minidisc?

Can?t assist in general, but do you specifically want to use a dynamic
mic? In my experience, electret mics (often falsely called capacitor)
are better for a number of reasons. More robust, smaller, higher
output, lower noise, cheaper, better linearity and accurate phase
response. I have an expensive, studio quality lavalier (or lavaliere)
electret microphone which though very good is little better than real
cheap insert types. Cheap dynamics are awful. Top of the range
dynamics are excellent, but on a budget.......

Best

I've done some research, and I think I've decided that I want a Shure
SM57.  It's a great mic, people say.  What are your opinions?

And what about the minidisc recorder?  I'm still stumped.

Yea, good mic. Never had a ?Shure? complaint. Still prefer electret
myself (I said capacitor but meant condenser -- electronic background)
but depends on what you want to record. Probably just as important are
pop shields which do a remarkably good job. Wind shields too if you?re
doing outdoor. I guess though, ideally you would have an array of
mikes. If you want to record someone ?recollecting?, a lavalier is
good. For vox pop interviews a ?business? type mic looks the part and
people respond accordingly. Sometimes you might want omnidirectional,
sometimes unidirectional, so unless you have an exact idea in mind you
could do with several mics. Got to start somewhere though and the SM57
won?t break the bank. Obviously any recording equipment must
incorporate appropriate input -- many are geared to electret these
days.

As for mini-disk or other medium, I cannot comment with authority so
hopefully someone else can take it up from here -- and good luck with
the venture.

Best