Don't buy a bike off craigslist unless you know what you're looking for. Go to several different bike shops. Have them size you for a frame (some will charge you for this, some will do it for free; don't pay too much for this, you're only looking at a 20 minute bike ride). Once you know what type of bike you're roughly looking for, try renting or borrowing a bike. Or buy one from a bike shop that allows you to return it w/in 30 days no questions asked. Do that 3.5mi work trip with the test bike. Figure out if you need lots of gears, or can get away with a cheap single or 3 speed.
Now that you've figured out size, type, and gears, you're ready to actually buy one. Unless your commute is really hilly, I suspect that you can get a cheap bike from the bike shop or online with minimal gearing. Leave craigslist to people who are more experienced with bikes, and can identify problems with used bikes.
There are lots of places online with bikes in your price range. Bikesdirect, Public bikes, etc. You might also find some deals at a local bike shop or REI. If you buy from a bike shop, make sure it comes w/ 6 months to a year's worth of free tuneups. If you buy one online, pay attention as to whether you'll need to put it together. Sometimes it's worth paying extra to have a bike assembled and tuned up for you. Sometimes it's not.
Once you realize how awesome your commute is and how reliant you've become on the bike, learn how to fix it yourself. Even if you don't actually do the work yourself, you'll at least know if a bike shop is feeding you a line of bullshit or not.
Also, find the bike shop where, when you bring in your bike and complain that it's making a weird noise, they spend 2 seconds tightening a loose bolt, don't charge you for it, and also don't make you feel like an idiot. Those are the good ones.