the comma or the period always goes inside  the quotation mark. He said, "I love you,". 

Should you capitalize the first letter of the  quote if it's in the middle of a sentence? 

Yes if what's quoted is a complete sentence. 

What he told me was, "It's  supposed to rain tonight." 

It's supposed to rain tonight. Full sentence,  capital I. If it's not a full sentence,  

don't capitalize it. For example, he  said tonight, it's going to be, "rainy,  

chilly, and all-around awful." Punctuation quick tips!