You're looking at probably over $100 to replace the rear wheel, gears, and tire. Your cheapest bet is to get something on eBay (where there's a good chance you can get all three at once), if you know what you're looking for. Biggest issue will be making sure you have the right number of gears (probably 7 or 8 on that bike). 7- and 8-speed freehubs have different width. 8- and 9-speed gear clusters fit on the same freehubs.

I searched eBay for 7-speed rear 26" wheels, and this is the only viable (in your price range) one that I found. Lots more high-end stuff. You'd need to buy a tire/tube and cassette sprockets to go with this.
http://cgi.ebay.com/ws/eBayISAPI.dll...tem=7233373036