I use whetstones. I have a king 1000 but it isn't great. However, the king 6000 works really well. If you want the cheapest combo, get the King 1000/6000. There's no point to moving from 1000 to 2000. You can easily jump to 5000 or 6000. You'll also want a low grit stone in case you get a major chip on the blade. I use the Shapton Pro 280 for this and still is very time consuming. It will take hours on an 1000 grit stone.
And if you want a step up:
http://www.chefknivestogo.com/imtwosi1kst.html
End grain wood is considered the best.
Restaurants use cheap soft steel because they are much more durable than expensive harder steel. Even soft German and French knives will damage much more quickly. The handles are also designed to prevent pathogen build up. The knives will be dropped on the floor, placed in the dish washer etc. A high end knife will be ruined in one day with that sort of treatment while the cheap knife will hold up just fine.
As for knife cost, you will definitely get a sharp edge that is noticeably better in the $50-100 range. And you'll usually get better cutting performance due to the knife design and better heat treatment at $200+ dollar range. But if you don't know how to sharpen, you're just wasting your time.
As for sharpeners, you also need to grind the knife even if you use an electric or handheld sharpener. The grind of the knife will keep getting thicker as you sharpen. I just use the whetstones to fix the blade up.
I currently have Takamura R2, Tojiro W#2 and Okeya W#2. I'd like to get a Blue #2 240mm chef, maybe a Yoshimitsu or a Konosuke (if I can afford it - not sure if it's worth it since I can't play with one).