To be honest, there's no "cheap" place to stay in and around DU. I went there to get my undergrad @ DCB and am still contemplating going to DU Law now that the LS is on the main campus.
There are some converted student dorms that have been renovated and are now private housing for rent. As for the LightRail, it does exist, but the completion won't be until late 2006, or early 2007. It is a kick-ass way to get around the city since it's pretty spread out. Ironically, our busses around here aren't that stinky, the air is pretty thin, but we do have bad smog days every once and a while. BTW-you can get the RTD pass through the school and/or through RTD online...I recommend it if you aren't going to have a car.
I recommend checking into off campus housing (just blocks away) toward Observatory Park (East of the school), there seems to be more and more available housing. And get it early because once most of the Trust-Fund Hippies (belive me, there's very little that's 'poor' about DU-it's actually part of the mystique) come back to school, you're probably going to find absolute squat.
I still live and work in iBanking in the Denver Metro area, so if you have questions by all means, fire away...
Good Luck!!
Cheers Dude...