RATIONALE: Thalidomide may stop the growth of cancer cells by stopping blood flow to the cancer. Drugs used in chemotherapy work in different ways to stop cancer cells from dividing so they stop growing or die. Combining chemotherapy with peripheral stem cell transplant may allow the doctor to give higher doses of chemotherapy drugs and kill more cancer cells. Giving thalidomide before and after peripheral stem cell transplant may be effective in treating newly diagnosed multiple myeloma.