I really like the ideas of seeing if you can cut the rehearsal dinner.
My brother's rehearsal dinner was at a local Mexican restaurant, and while it wasn't what his wife's mom wanted (they married at 22 and it was all VERY much under the mom's thumb while she gave her daughter the wedding she, the mom, had always wanted), it was fun for the couple and the guests.
My rehearsal dinner was at Old Spaghetti Factory, organized at the LAST minute...we were lucky to get the private back room! Again, fun.
Another friend had a HUGE cookout at the groom's family's house. FUN! (except for me, the lone vegetarian, with people thinking that salmon was acceptable...even if it were, I despise salmon with a burning passion)
There are SO many ways to have a rehearsal dinner at a less fancy place and still have huge amounts of fun.
And frankly, at a quick glance, the rehearsal dinner sounds better than the wedding dinner, and that just doesn't make sense to me. I'd dump that dinner, have it somewhere else, off island perhaps, and see what that does to the budget.
And since it's generally accepted that the groom's parents pay for the rehearsal dinner....