What equipment do I need to be able to produce 'HD quality' videos?
With your budget, I would suggest investing in a few basic lights and decent audio recording equipment. 

While a second camera is nice to have, creating production value with the non-picture parts of your films will make them a lot better. If you need to get second or third angle, just move the camera for a closeup and re-run the scene. Sure, it may take longer to shoot, but from my experience, you'll have better selection in the edit suite than if you're just cutting a bunch of suimultaneously rolling cameras together. 

There's also the issue of matching. The 7D is so spectacular, that I'd fear mixing in something that's not comparable (and likely over your budget) will be very visible to the viewer. 

Lighting: Learn basic three point lighting. Rather than buying a kit new, check eBay for Lowel lights. They're relatively well made (using metal!) and still very economical. The ProLight, VLight and Rifa lights are good to start a digital video lighting package with. I've put together kits designed to my specs buying individual pieces off of eBay, and spent half the cost of a comparable kit new. I would say a good place to start is 2-3 ProLights and a Rifa Light, maybe a vLight. The latter is good for just makign something bright, but isn't terribly good at adding modeling to a scene. It may not be appropriate for your garage shoot. I usually use it to uplight a tree in night shots jsut to add some texture.

Accessories for lighting: stands, dimmer switches and a roll of blackwrap. Gels are useful once you start shooting outside...you'll need to balance the lights to match the sun. Read about Color Balance and Color temperature if you're unfamiliar with the concept. 

Audio: Invest in a good shotgun mic and a boom pole. I cannot stress enough the importance of good audio. If your picture is mediocre, awesome sound can save it, but no matter how awesome your picture is, bad sound makes it unwatchable. Play around with the mic to learn how its pickup pattern works and to find the sweet spot for placement. If you need to record sounds effects, ambient sounds, or record dual system, pick of an H4N. It's one of the best investments I made into my audio kit, and I use it on every shoot.

A solid, economical mic is the Audio Technica AT-435B. Sennheiser is also a good brand, but more expensive. I forget my model numbers off the top of my head; perhaps someone can fill in? 

In short, a second camera is not as necessary as lighting and audio. The production value that you can add with those things far outweighs the convenience of adding a second camera. If you do insist on a second camera, look at the GoPro. I work on a lot of network shows that just place one of these to get b-roll...for cooking shows, it'll just monitor the cooktop while the rest of the crew runs around the restaurant. Quality is good enough to cut ionto broadcast shows, but the size of the chip limits its contrast and color reproduction...so there is a marked quality difference between that and the 7D. That being said, perhaps killer audio and lighting will compensate. Good luck!