Two questions, I have never really played flight sims, but I kind of want to try one out, I'm assuming this is the way to go since I've been hearing wonders about it since it came out years ago, should I get it? And I don't have a joystick, I know it's better with one, but I don't poop money, so is it still fun without one?

Pretty much as honorbuddy, I've never played a flight sim but I think now is the time to start so... is it better to use keyboard or a ps2-like controller?

Well, the best option is to use a joystick, even a cheap one. If not that, I guess an analog controller would be in a distant second place - it's better than the on/off behavior of keyboards, even if not optimal.
I don't really know how fun it is without a joystick, as I've never tried it without a joystick. I can safely say that it is the most fun with a joystick, however.
And there are cheap joysticks nowadays... you can get one for 10-20 dollars in the US, I think.

Any recommendations on a joystick that is not too expensive?

If you're after a single stick, I'd suggest a logitech wingman extreme. They're not the flashiest things ever but they're functional, cheap and reliable
If you want something fancier, a Saitek X52 stick & throttle setup would serve you very well, you can run almost every control you'd ever need from that without ever touching the keyboard. Still not insanely expensive but also not cheap

Freespace 1+2
Descent
DarkStar One I think...

Mmm... Since the other day I bought a big box copy of Freespace 2 and I haven't tried it yet, I guess I can buy a cheap joystiq and give it a try.

They may (or may not) be hard to track down, but also:
Echelon, Tachyon, Independence War 1&2, X-Wing Alliance, Crimson Skies (!!!!!!)....Freespace 2 is of course awesome and you should play it.
Oh! Almost forgot Allegiance, which is a freeware online space sim. Go play that too.
I have a joystick question: there seem to be a number of reviews on Amazon of the Wingman extreme saying things like 'gave out after four months'. That makes me nervous. Comments?

It depends on how those people treat their individual joysticks....If they use them constantly for 22 hours a day then yes they will give out after 4 months. If you treat your joystick well, it should last for quite a while...

I tried playing Freespace with a joystick, and I just couldn't do it for some reason. It just felt to awkward, and I couldn't do anything.

4 MONTHS? What the hell were they doing to it? Mine's still going strong after 8-9 YEARS.

I've always wanted to get this game but never really bothered, I think I'll buy this at some point.

Maybe they were single-handedly waging war against the console barbarians and the only weapon they had was the joystick....

Then they should have bought a thrustnmaster cougar, that bastard is almost entirely metal and would make a great murder weapon. Logitech's are all plastic and whilst its good, its not right for murder, thats why I switched the the good old fashioned chainsaw