I have the same as AES, it was £25 (last September IIRC) and a box of assorted router bits for £7 (58p each!).
the router seems to be good quality for the price. It is not massive (compared to some), it plunges smooth, the locking method is easy and secure and seems to be better quality than other 'cheap' types. for example the one in homebase seems to be a lot lower quality but is £10 more and it feels a lot lighter than some (probably a bad thing!)
it is £25 so pocket money to buy, 3 year warranty and is plenty enough for a beginner to use. Also comes with different collets (only ever use the 1/4" one), a 'guide' and usually they sell a router bit assortment for £7
so for less than £35 you have a reasonable kit. they also sell a router table, it is supposed to be rubbish, but it has bits that people use on home-built tables (switch/etc).
I have not used it in much anger, but used the trim routing to match an overcut sheet of ply to the door i was repanelling (worked well) and just built a router table out of an old cabinet, and be picking up a pillar drill. I am slow starting but want to do the obligatory tealight holders to get used to the router, then just get more confident with the tools at hand.
http://www.socialshopping.com/images/co ... outer-.jpg
http://www.mycncuk.com/forums/attachmen ... _small.jpg
i made this router table (and the fence works but not really pinpoint accurate for using without using pilot bearing bits but that's not a concern as edge routing is what i will be using mainly) to table mount it. I went to Halton Haven (charity furniture store, Widnes) , bought it for £10 (it was a Hi-Fi cabinet, with lift up top, they have larger units for <£20 if you have space and want a cheap but solid workshop cabinet), mounted the router (template cut, routed out to reduce the depth on the underside) and when edge routing is a lot nicer to use, safer (only a small section of the router bit is exposed) and the wood square is where i mis-cut but made a small wood cover and hole, so i can use larger bits and just change the wood for one with a larger hole.
So total cost, <£50 all in for the router, bits (bought a second pack when Aldi were selling them off for £4 a month or so later, 33p each!) and some time. If i find i don't use it, well £50 spent over a few months isn't bank breaking, and if i do use it and find i need something more suitable then i have proven that it wont be a waste.
So if you are starting, i would either wait for Aldi to sell them or just look around.
Also for the 1/4" or 1/2", all depends on your needs, for a beginner a 1/4" is probably all you need.