My fiancé and I use a retro hand-crank ice-crusher (http://www.amazon.com/Metrokane-Retro-Crusher-Clear-Chrome/dp/B0009I4NKQ)...it works really well and does fine and coarse crushed ice.
Also, for a good caipirinha...you should make sure you're using a decent cachaça...there's some articles online about which ones are good. Also, make sure you use freshly squeezed juice!

^^;; We're obsessive cocktail snobs.