Can I develop iPhone apps in Windows?
Nope, you have to use a Mac. All the tools are on the Mac, as is the simulator program you'll need to test in.

Even if you could somehow finagle the whole thing running in Windows you still need a Mac to submit to Apple to get it on the App Store.

Cheapest scenario you're looking $699 for a Mac Mini and $99 for the iOS Developer Program (which you won't need until you want to run the thing on a real phone). You can go cheaper on the hardware if you buy it used but something to keep in mind is that it must be an Intel-based Mac running Leopard (10.5) or higher.