Hey BarnacleMike,
Welcome to the "boat building bug" or is that "club"?
I read your thoughts and questions about what wood to select etc. and felt the need to weigh in and share my experience.
I hear you on the issue of budget. Good marine grade plywood and lumber IS very expensive. In the long run, I think it's the right way to go, though. You don't necessarily have to buy it all at once. The build is going to take you a while and so spreading the purchases out over time is the way to go. The total might be more, if there's shipping each time, but at least it's more manageable than a big bill up front.
Then there's the resale of the finished boat, if your "bug" takes you to a new build. A boat built from quality materials will sell at a much better price. It's a degree of speculation on my part, but if workmanship, hardware, motor, systems, the market etc are all equal, then a Squirt built with marine grade ply and lumber would be able to add $1,000 to the sale price and possibly more.
If the idea of selling your future treasure is completely out of the question and I've offended you, then having built your boat from marine grade ply and mahogany, you'll know that you'll get many more years of use out of it before you need to do major overhauls.
I hope this helps in your decision, but first off what ever you do, conserve your money by spending it when you need the materials. It's going to take a while to build anyway.
Good luck and have a blast building.
Incidentally, the best set of step-by-step pics that I've found for the Squirt build belongs to Jeff Cobb:
http://jeffshomemadeboat.zoomshare.com/0.htmlCheers,
Richard