I did this with an iMic and Sound Studio. Overall it worked quite well, although there were a few problems. This is with an iBook 700.
In some of the songs, I found strange clicks, etc. that were definately not in the original vinyl. Also, for some reason on some of them the left channel was extremely quiet, and I ended up recording those albums again. It's possible there's something wrong with the stereo but I doubt it, as I've never noticed it before.
As for breaking up tracks, I found no automatic solution, although it seems like it is perfectly possible. However it wasn't that bad in Sound Studio. You just look at the preview, on the top of the window, click on the silent areas, and add markers. Then you must choose the menu item to separate the tracks.
I saved the files to AIFF, burned them to CDs in iTunes, and have now started ripping them to AAC.
I did try Griffin's free sound editing app, 'Final Vinyl', and found it to have a very unintuitive interface, slow, and unreliable. After my demo of Sound Studio ran out, I downloaded SPARK ME, at the suggestion of some one on the forums, and it looks pretty good.
Overall, I found the quality to be more than satisfactory, ( although I'm not an audiophile), and would definately do it again.