Does any know if its better to mic a combo amp (like a fender mustang iii v.2 [and ive tried the usb recording feature and it didn't really sound all that well]), buy a desktop processor (like a POD or a boss gt-001), or to use a software (like guitar rig pro 5) for recording stuff like covers or originals songs?
Honestly, it all depends on how you set each method up. I like guitar rig for when I'm writing and need to get things down quick. But out of all those options, I'd probably go with the plugin Amplitube.
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Having done all three, I'm a fan of mixing a real amp with a real mic. That said, for a lot of people, including myself at the moment, getting an amp loud and isolated well enough to get a good recording isn't an option. If you have a DAW with amp sims, I'm a big fan of using those, both because they're improving in quality, and because it gives you more flexibility to change the tracks. That said, if you have to pick one or the other, I'd go for the processor, because it's easier to take live, and at this point they probably sound a little more real than the software models.

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I mic my amp, but lots in the Recordings forum always use sims.

Go over there & read the stickied threads.
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With that amp, definitely go direct in and don't mic.
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You CAN play anything with anything....but some guitars sound right for some things, and not for others. Single coils sound retarded for metal, though those who are apeshit about harpsichord probably beg to differ.