There's musicmaker, which is available through this site, but you'll be hard pressed to find something with virtual instruments.
There's the frankly-awesome FruityLoops Studio, which you can download and use, and even record MP3's - but no save in the demo version (but I say again, mp3 export - so your jammin if you can write a whole song in 1 sitting). It's centred around techno instruments mainly, like synthesisers and plugin effects, but it's quite a neat package - and the price is right. I'd say download that and see how you get on - I take a lot of pleasing when it comes to music software, and I'm growing to love FLS.
There's Music Generator (or something) on the XBox, if you can wire the sound back to your PC, you could use that - and it'd probably be based loosely on Music2000 for the PSX, which is no bad thing at all.
For more traditional game music creation, you could look into soundtrackers, esp VSD ') - but I think your after something a bit more accesible, like you don't necesserily want to hunt for good instrument samples yourself.
Van-B
Muhahahahaha.
