Cloth is the way to go. We've been at it for 22 months now!
After the baby starts eating, the poop changes a lot and you can just knock the poop into the toilet and then drop it in your dry diaper pail (with a cover!).
We do about two loads of diapers a week. We wash each load twice. The first time in cold to knock the remaining poop off (with phosphate-free detergent, a dash of borax and a dash of non-chlorine bleach). Then, we run the second load on hot with the same detergent combo. The second load we put on an extra rinse to make sure all of the detergents are rinsed out.
If you get wool diaper covers, it is more complicated because you don't want to wash them on hot, so we take them out after the first wash is done. Then, once in a while you will want to add more lanolin to them to keep them water-resistant by using a detergent with lanolin in it. I really like wool covers because you can use them more often before washing because they don't get that stinky pee-smell. You just wash them if they get poopy.
We've found a ton of cloth diapers and covers at yard sales, from friends, consignment stores etc. We've probably spent about $200 total at this point but we have a ton of diapers and covers of all kinds and sizes that will last us until our guy is ready for the toilet.
We also use soft flannel wipes that are washable. This is a big savings too and they go right in with the diapers. I just wet them and pop them in a diaper warmer with a couple drops of Tea Tree oil to keep them bacteria-free.
When on vacation, we use 7th generation wipes and diapers--you can get them cheaper by the case on Amazon.com.