The Grey Eagle is great if you're open to the vibe it has. It's definitely a no-frills place to see a concert. Not as polished as the Orange Peel, which is good and bad. The seating capacity is probably closer to 300, which makes for a very intimate concert experience. Acoustics are decent, primarily because the space is small and the ceiling is so low. The little cajun restaurant in the back of the place is actually pretty good. Decent beer selection, although they are woefully understaffed if it is a sold-out show. Personally, it's a toss up between this place and the Orange Peel as best place to see a show. They both have their upsides.
As for cheap places to stay in town, I always recommend using priceline. You get better hotels for a lot less money if it works out. If you choose "downtown Asheville" as the area you want to stay in and "2.5 stars" as the level of quality, and they accept your price (I'd try $65), you'll either end up in the Courtyard by Marriott or the Renaissance Hotel. Fridays and Saturdays make it harder to get your price accepted (especially in September), but it happens on occasion.
Here's a good link to people's results from priceline. It's a great resource to know what to bid:
http://biddingfortravel.yuku.com/for...-Carolina.html
You'll have fun at the Grey Eagle, trust me. Good luck!