Back to the topic...
I guess I have a fair amount invested in my "practice" kit so far, not cheap by any account, but I arrived at this solution by trial and error, so it's definitely possible to do it more cheaply. (Note: $$ values here are only given for essential aspects of the setup, I actually spent quite a bit of money trying out stuff that didn't work.)
I have a low-end acoustic drumset (Ludwig Accent CS Combo, $650), mid-range cymbals (Sabian XS20s, reg price $700 got it at 50% at SL sale), and Tama Stagestar mesh heads on them ($80, I think? can't remember). The mesh heads come with cymbal mutes. I also use a practice pad in place of a snare (HQ RealFeel pad, $40 or $45 depending on your model, but I won't count this because I assume most drummers will have a practice pad... if you don't go get one now!)
This works out to $980, which is a lot for a practice kit (also consider the fact that the Ludwig kit comes with only one cymbal stand and the mesh heads only come with mutes for hats and one other cymbal) but it's still cheaper than an electronic kit. Mesh heads allow you to hear yourself somewhat, with very realistic response. As always, though, nothing feels like a real drumhead on a real drum.
What I really like, though, is the option of being able to play acoustically if needed. I haven't actually been in a situation where I need to cart my entire drumkit, but I've had to bring my floor tom and snare drum for stage and theatre productions. Depending on your situation, this may not be necessary and you might instead choose to go for a practice pad kit or an electronic kit.
The big hole in this setup is the fact that the bass drum problem is not solved. I live in a HDB flat and don't have the luxury of a soundproofed room. I tried the Soundoff pads, but they didn't work well and on the bass drum the muting is still very weak. I'm looking to buy a Hansenfutz pedal ($90 from DRMP) and I will have a fully functioning practice setup.
If hearing yourself play is a big factor, though, I would seriously consider the Alesis DM5 (going for $985 at Luther) - reasonably priced and cheap for an electronic kit.
Now, if I had a lot of money to burn, that'd be a different story...