For free PCB software, you might go to
http://www.expresspcb.com/
They offer free software to induce you to use their PCB manufacturing services. I've never used them, but quotes I've gotten from them seem competitive.
I've used the dry transfer stuff from Radio and had to deal with it flaking off. I've used the press and peel stuff that you print out with a laser printer on special transfer sheet, then iron on. That stuff works pretty well, but you need to follow the instructions very carefully. I've had trouble with getting it too hot and also peeling it off too soon.
With both types, you can fix small errors in transfer using a "resist ink pen" (basically a standard indelible ink marker with a fine tip will do). For gross errors, you're better off cleaning up the copper and starting over.
As for blank PCB material, the stuff that's readily avaible at Radio Shack or hobby electronics retailer should all be OK. Your only real decision would be single or double sided (I'd start with single sided boards if you've never done it before.
It should go without saying, but be careful using, handling and storing the Ferric Chloride echant.