Hi
I haven't tried Fogbuzz, but evidently it is not inexpensive: http://www.fogcreek.com/fogbugz/pricing.htmlNote that JIRA is free for open source use with unlimited users (at least as I interpret their website), and has a familiar interface for many because of widespread adoption. It does support various email notifications.
Regarding Google Groups, while it may index the mailing list, does it permit web based replies or creation of new posts? I had in mind jforum (http://jforum.net/), since it is Java (and not PHP) based, and also free. Some sites using jforum are listed at http://jforum.net/production.jsp, to get a feel for it.
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