Epson 3800 unless I am very much mistaken - actually works out as a better deal than the A3 Epsons due to the amount of ink you get with it!
Snapfish and the like are good for large quantities of smaller prints. For enlargements, DS Colourlabs are very cheap for sizes up to 18x12. Over that, your neighbour's very generous offer can't be beat - he surely wants reimbursement for materials? The cost of printing A2 adds up, especially if you use good paper.
I think we've all been circling around the point that highest possible image quality is obtained through a combination of camera image quality (this includes resolution, metering and focus accuracy), lens resolution (ideally at the sharpest aperture, usually f8 or so) and photographer technique (including using a good tripod for critical sharpness). Any serious weakness in one of these, and it lets down the overall result - a few megapixels here or there is only one variable amongst many.
Don't skimp on the lenses, but remember, you don't have to buy new; Ffordes and Mifsuds, to name but two dealers, have a reasonable selection of used glass. Remember that you'll change camera bodies a lot faster than lenses.