We did the cheapest BBB package and my DD's loved every minute of it. Was it worth the money?? Yes and no. It was worth the memories - the look on my DD3.5's face when she was spun around and presented to the mirror to see herself for the first time...priceless! However, we've taken several other trips to WDW without doing it and never felt we were missing out. Personal preference I suppose. If you're just looking for a fun hairdo, you can always check out Main Street Barber Shop - they put colored paint and confetti in the children's hair for a few bucks ($5 on our last trip, but I think it's up to $7.50 now??). That could be a budget alternative, although not exactly the same thing.
And yes, you can meet several princesses in Toontown - across from Goofy's Barnstormer, in the big tent like building (can't remember the exact name right now - sorry). And Ariel can be found in "Ariel's Grotto" behind the Dumbo ride in Fantasyland.