Anyone have a clue how to begin? What are the legal issues, what kind of agreements are needed, etc.? I'd appreciate any info.

Hi. I run an internet company called Dira Interactive. I would suggest you do the following..
Require all your employees to sign an NDA and some type of Work Contract.
Have at least 1 meeting a week on a chat program such as AIM or ICQ.
Have a design plan! (Important!!) Decide who is going to do what...
Then just look for good programmers, artists, etc

Have fun!
Nathan Strandberg
CEO, Dira Interactive