I have the next version up from this, the Canon HV40, and I've used it to film fire poi. The fire looks beautiful in HD if it is lit well and in focus. Manually focusing it is a must and is pretty easy, and if you want to hear the fire/music better you can just buy an external microphone to add to it because the built in mic really sucks (as do most built in mics on non-professional cameras). I got a decent external mic for around $50 bucks. I find that you have to add a bit more background light to be able to see the subject spinning fire. You might be able to find the first version of the camera, the Canon HV20, for $500 or less. It has almost all of the same capabilities as the later versions. Mine was about $800. Worth it, though. I also use a wide angle lens, which helps because sometimes with fire poi, you have to have the camera really far away to be able to see everything that you're doing, but with the added lens you don't.

You can download trial versions of pretty basic editing programs with HD capabilities as well (Sony Vegas Platinum, Adobe Premiere Elements, or the professional versions of those programs), if you can't afford to buy them. And if you're a nerd you can quite simply crack into them and get the full version without paying for it. I find that it's better to put the music in afterwards in post-production, rather than use the audio that comes straight from the camera.

Sony Handycams are okay, but compared to the Canon HV's they suck. Plus most of them are touch screen, and I find that manually focusing with a touch screen is kind of annoying. The colors they produce are not nearly as rich and bold as with the HV (or any HD) cameras. But then again, you can always make crappy desaturated colors look much better in post production anyway.