Waders: Breathables hands down. BTDT with the neoprenes - I have no plans to go back. I'm a Hodgeman fan myself.
Tying kits - some are good, some suck. I'm still using a vise that came with a kit I bought a decade ago - it's a crappy vise, for sure. It's almost worn out. Any vise in the $40 and up range will be fine unless you're planning to go whole-hog and start pumping out flies like a commercial tier. As much as I've love to have a Nor-Vise, I'm not really ready to drop the cash for one. If I were buying a new vice today, I'd probably look at an entry level rotary vise, just because they're nicer and makes tying a bit easier. You can get a decent rotary vise new for about $80.
Tools - you don't need super expensive tools, but I will recommend you spring for GOOD bobbins. The bobbin is the 2nd most important tying tool, next to your vise, and honestly, you can use a crappy vise and be OK, but crappy bobbins are just going to make you hate life after you've snapped the thread ten times on one fly.
You don't need a lot of tools to begin tying, a bare bones kit for me would include:
Four bobbins (one for thread, one for lead, one for wire, one for floss)
Pointed, sharp scissors
A 2nd set of scissors for general cutting, they don't have to be as nice as the first pair. Don't use your good scissors to cut wire.
1 bobbin threader
1 pack of sewing needles (to be used as dubbing picks, clean hook eyes of head cement or paint, etc)
Whip finish tool
Hackle pliars - rubber grippy pad type
As for materials you get in most kits - they're usually third-rate junk meant to tie flies that you probably won't use. There will of course be stuff for a few patterns you will, but it's probably a 50-50 proposition on that one.
I'd start off with a SHORT list of flies you know you want to tie, and just get the materials specific for those flies. That means get the recipes for the flies before you go shopping for materials. You can save some headache by limiting yourself to one thread color - I like black. Much like how women will go with a little black dress for most occasions, black 6/0 thread is the most useful thread there is.
Lets say you want to start tying up traditional Woolly Buggers, in say, black or olive. Get yourself a package of marabou (cheap, about $5, will tie hundreds and hundreds of flies), a couple cards of chenille (say, $3 a card on the high side, so $6 for two of them, will do a few dozen flies each), and lets say you go crazy and get yourself a hen cape, which is useful for more than just the buggers. That's probably $20 now. Then get yourself a 50 pack of Mustad 2XL shank streamer hooks in whatever size (I like #8 for a good all around size, but you could go with 6's and be just as good). That'll set you back $4 or 5 bucks or so. $2 for a spool of 6/0 waxed thread if you can't find it cheaper. So now, you're into it what, less than $40 in materials that will tie up probably at least 60 flies, if you don't waste a lot of chenille. That brings your per-fly cost down below a buck already, and with the hackle cape and the bag o' marabou, you're still golden for hundreds more flies - and after you've tied enough of those buggers, it'd be hard to tell your flies from the ones sold at the fly shop for $2 a piece.
Once you get the hang of basic fly construction, then you can go hog wild and buy materials because it looks cool, and start experimenting with patterns and creating your own flies.
One thing I'll recommend - get a good book or two on fly tying. It'll be worth every penny - especially one of the more modern books with step by step photo illustrations, pattern recipe lists, etc. You can also find these at the library, if you can't afford the books (they run about $30+ new at Powells on average)
Initial cost of getting in to fly tying is a bit high - but that's how fly fishing generally is, BUT the good news is that tools, vises, and gear is going up in quality, and generally coming down in price, or at least it's not going up in price much. Materials I've seen an increase over the years, but nothing bad. Material costs don't really get crazy until you look at the exotic stuff, or top shelf hackle capes. Some guys swear by the $100 a neck rooster capes - but I'm happy as a clam with my $30 cape. I don't think the fish can tell the difference, honestly.
Do yourself another favor - drop by River City in Tigard, and talk with Don the owner. He's a really good, honest guy, and he'll help you get started, and he won't rip you off. There's usually a bunch of guys sitting around the shop BS'ing and tying flies too - and if you ask, they're usually helpful and will show or tell you how to do something. Those guys always love to talk fishing and fly tying. The advice is worth every penny on the drive over there. Don has a huge selection of tying materials and tools and hooks, and he'll help you pick out what you need and let you know what you probably don't need if you let him know what your budget is.
