yeah, a direct flash would just drown/erase the details of the figure. you should just turn off the flash or cover it with white paper to diffuse it a little.
you can also make your own photo tent. it's easy. just take a large box (i used a television box) and put a white paper to cover the inside (it would serve as your background so you can use other colors if you want.)
for the lights, i'm using some cheap rechargeable lamps that i bought for Php150 each (approximately $3-$4).
having a well lighted photo tent would decrease the blurriness and graininess of the pics that your taking.
here's what the set up looks like:

yeah, i know... the lamps don't look very manly... but it works well! haha!
the black thing in front of the figure is a custom made tripod. it's made of a suction cup base, bendable metal wire arm, and three more bendable clasps that holds my cellphone (i only use my cellphone to take pics of my customs). i just put the cellphone in position, set it in auto timer, and let it take pictures on its own. having it on auto timer also decreases the blur. i have very shaky hands so it blurs when i'm holding the camera phone and taking pics.
the trick in having clear pics does not depend on having a hi-tech camera. you just have to find a decent one and have a well lighted surroundings so that it can take clear photos.
i use my nokia 5610 express music. the built in camera is 3.2 megapixels.
of course. having a dslr or a digicam with a macro setting would be great, but it won't matter if you don't know how to use it. so i suggest that you take that camera and abuse it! take dozens of pictures and practice with it! it's fun!

or if you really don't want to make a mini photo tent, you can just take the figures outside and use some natural light. and remember how to use the sunlight to your advantage.
don't take back lighted pics unless you are going for some silhouette effect for your pics. position your figure facing the sunlight so that the details would clearly be seen when you take pictures.
here's what the pics would look like:
outdoor light. (without the photo tent)

indoor set up (with photo tent)

i'm not a pro at this and sometimes the details still wash out when i'm using my lamps, and IMO, outdoor natural light still produces better pics compared to indoor artificial light.
so i'm thinking of making an open top photo tent so that i can take the set up outdoors and still have the white background. only problem with that is you always have to wait for the sun to shine, and there's a particular time in the day that the sunlight is perfect for a photo shoot. so time is very critical if you're going to take pictures outdoor.
well, hope that helps.