A hanging bag will always be superior to a free standing bag. Free standing bags slide all over the place.
A hanging bag doesn't have to take up a lot of room either. I recommend an everlast or comparable heavy bag of at least 60-80 pounds. Hang it from any sturdy beam in your garage.
I also recommend Bas Rutten's all-araound fighting workouts on CD. Hitting the bag is great, but without someone calling out combos and exercises, it can be hard to push yourself. Trying to keep up with Bas will force you to develop speed and rhythm, rather than just bashing away.
It is a fantastic workout and lots of fun. I haven't had a sanctioned fight in 3 years, but I still do my heavy bag work religiously. It's a great investment in your own physical and psychological health!
Si vis pacem, para bellum