AVR-Chat

I'm just starting out with the AVR. I bought an STK500, STK501 and 
two ATmega64s from DigiKey. AVR Studio is described by Atmel as an 
Integrated Development Environment and I expected that in conjuction 
with the STKs I would be all set. However, unless I'm missing 
something, there is no C compiler and no means of debugging actual 
hardware. It seems I need to go out and spend more money on a C 
compiler (or struggle with GCC) and also on another piece of hardware 
such as JTAGICE. Is this right? Is there really no compiler in AVR 
Studio? Is there really no means of debugging a program on the 
hardware without another adapter?

Graham.