There's some amazing software out there for panoramic photography. Various software packages warp, stitch and blend sequences of photos so that they (ideally) look like one big, high-resolution, panoramic shot. However, getting these shots to turn out perfectly isn't easy when handholding your camera or using a normal tripod, especially when some parts of the image are fairly close to the lens.
The issue is "parallax", or, to rip something out of the American Heritage dictionary since I'm not about to try to explain it myself, "an apparent change in the direction of an object, caused by a change in observational position that provides a new line of sight." To fix this, you need to get the camera to rotate about a specific point that is forward of the screw socket in your camera.
Panoramic heads can be very expensive in the $300 to $500 range for "name brand" heads. Several designs for closer to $100 are available on the web, but look a tad on the flimsy side.
Building your own panoramic head for an SLR isn't too hard or expensive. The parts for the design shown here cost about $10. Every part here is available at a store like Home Depot.
Once you get past some of the misinformation out there, the only really hard part is figuring out the dimensions. The downside is that the mount is only useful for a specific camera/lens combo. On the other hand, you can't mistakenly mess up one of the critical adjustments once you've built it, and the homemade mount is as light as a couple small pieces of wood.
My woodworking skills aren't top-notch, but there's really not much need to make it look even this nice. Don't worry about appearance, just get the key measurements close and you'll have a fully functional new toy.