I'm planning on recording some guitar instrumentals soonish, more for fun than anything else. My rig will be very basic, just Guitar ---> MicroCube ---> Sound Card ---> Audacity, but what the hell.

My question is this:

Should I play the whole rhythm guitar track myself, all three minutes, or whatever, and record it in one take, or record one bar and loop it?

While the first option will sound more natural, it leaves more scope for mistakes and irregularities, but the second one might sound a bit chopped up.
play it all a few times then pick the best recording, if theirs a noticeable mistake then you can attempt to cut and past a better part in but that can be tricky
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Pretty much, you hit the argument on the head. Studio magic enables you to record one bar or phrase and loop it, but the live feel shows your skill as a performing musician. It's all preference. I prefer to do the rythm of one section then stop. So I'd record Verse and Chorus separately.
I record straight through unless the parts are ridiculously difficult. If I make a whopping mistake I'll go for another take, mostly because it pisses me off, but if it's just something minor I can cut-and-paste from another section of the song I'll do that. But I'm fairly good at editing in my chosen software.
If you're not already decent at editing, I think you may find the looping approach a bit disjointed. You may as well record the whole thing IMO, or at least in decent chunks.
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I think that the easiest way is to simply start the record, and when you mess up, just pick it up somewhere near the part where you messed up and go from there.
Then after you recorded the whole track, just adjust the parts.
I record in chunks but don't loop and it works very well.

Basically if you can get the latency correction down right, you just record a verse. Then you start a new track and record the chorus. Then a new track and record whatever, etc.

Then mix them into a final track. It allows a natural feel but you don't have to do it a thousand times cause of that little mistake near the end.
If you're going to loop, try recording a few versions of the part you're looping, and then use each of them a few times to make it sound more natural.
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