I have a BLUE Mikey Digital mic for the older iPhones. Quality is pretty decent given what I paid for it and the compact convenience. Rode also make a mic that was a more proper x-y pair than the BLUE.
http://www.rode.com/microphones/ixy

As for quality of mixing inside of the iPhone, there's plenty of good mixing tools - Garageband is a great place to start. Quality can be as good or better than what you can do with your computer. The 'smart instruments' in Garageband are somewhat akin to the midi BIAB accompaniment, though with less variety.

-Scott

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