Hv40 + panny DV tapes
Velbon DV7000 tripod
RODE NTG-2 mic w/xlr-minijack cable +DIY boompole
DV Rebels' Guide by
Stu Maschwitz
I think this might push you slightly over your budget. Don't worry about stabilizers, DOF adapters, pre-amps, field recorders, filters, lens adapters etc...
You're just starting out, after a few shorts you might find that you prefer writing or post to actual shooting. You can always get that other stuff later, but I think it'll be more valuable to learn to get what you want with the basic tools.
My feeling is that film schools would prefer to see strong storytelling over technical skills which they'll probably teach there.
BTW, if you want shallow focus, you can open up the aperture and zoom in.