If you want a functioning shop, and you were limited to four initial options: 1) prohibitively expensive power tools 2) prohibitively expensive hand tools 3)

If you want a functioning shop, and you were limited to four initial options: 1) prohibitively expensive power tools 2) prohibitively expensive hand tools 3) cheap hand tools 4) cheap power tools ...I'd go for cheap power tools every time. You could get more tools than you'll ever need for $1-2k buying cheap but usable brands. They probably wouldn't stand up to more than DIY use, but they will work, and you'll learn what items you really value. For example, I now know that I use my cheap table saw enough that I could justify a more expensive one, however I'll never buy an expensive scroll saw. I think it's bad advice to start with good hand tools unless you have a high tolerance for manual labour or are apprenticing under someone in a fine woodworking area (e.g. luthiery).