The funny thing today is that the cheapest windows version is not windows XP, but windows vista. I remember reading somewhere that Vista Home Basic Retail costs 3.5K. Perhaps OEM may be 3K. Thats the cheapest windows you can buy which actually works.
As for Windows Vista Starter, well, considering the cripples it has, you will be better off with DOS and some gui for it.
What are your needs really ?
Starter looks ugly, and has a restriction allowing you to open not more than 3 apps at a time. I doubt you can bear with it.
If your budget can't go beyond 1.7K, I suggest you install Novell OpenSuSE 11.0 and ask any questions you have regarding it here in this forum. Its going to be very similar in its user experience compared to vista, and its free of cost. As far as a clueless newbie to that OS is concerned, its much more functional and easy to use than the crap that vista starter is. And perhaps its biggest advantage is that its an OS designed keeping in mind switchers from Windows Vista.