How best to print hard copies of 250 pages of handwritten material?

What about keeping a percentage of the pages as full scans and the rest as transcript? 250 pages of legible cursive is hard going compared to 150 pages of text (bonus you can more easily index and annotate it) and if you keep some significant pages as images, you get the emotional impact of his handwriting. I used a close up of a handwritten letter as a background with the text overlaid for one book (in a white box), and then significant notes as images throughout the text. Depending on how you format it, you might do a beautiful full folio of the letters as they are with 4-5 copies to be viewed and ordered at the memorial and offer a small paperback with transcripts of the letters and a very nice cover with a photograph against the letters as background that would meet your price point. Best of both worlds.

Not quite your price but close may be the espresso book self publishing system now used at many universities. Check out new York http://www.bookstores.nyu.edu/main.store/selfpublishing/ Set up service requires initial outlay (25-99$ depending) but then can run about 9.50 for hundred page bound books.

Another idea: set the book up on an online print service (like Lulu), buy a few copies for the most important folks and have a sample book available at the service. Then send folks the link and they can purchase a copy if they'd like. I'd totally buy a book of letters from a relative for $48 and would rather have that than a crappy B&W photocopy book with coil binding.

You might look at Amazon's http://www.createspace.com. I have used them for professional publishing needs and been quite satisfied with the results. It's intended for books you will sell through Amazon—and for that they apply a markup and take royalties and whatnot—but you can purchase as many copies as you like at cost, too. Per https://www.createspace.com/Products/Book/ (see the "Buying Copies" tab), a 125 page black-and-white 8.5"x11" paperback, perfectbound with a full color matte cover will run you $2.36/copy. There is no minimum or maximum run, but for 35 that works out to $82.60. Add $20.50 for standard shipping and your total's $103.10. (If you want full color books, it reckons $9.67 each. I've never had any color interior printing done by CreateSpace, though, so I can't speak to it.) You'll have to scan and assemble the pages into a cleaned-up and appropriately-scaled PDF, and maybe burn through a couple rounds of proofs to ensure your margins are satisfactory, but in the end you'll have a very professional looking product at a very nice price. Which leaves you more to spend on having 20 photos color printed 35 times... Include them in an envelope tucked into the back of each book?

Can you perhaps provide people with a condensed (shortened) hardcopy and scan the bulk of the documents into a PDF that you can email to people (or let them download from a site)?

It seems to me that Kinkos, er FedEx Office or Staples would be the simplest way to accomplish this. You give them the documents, they color copy the pages, collate and bind them. I did a quick google to see if their color copy prices were listed, but I couldn't find it. I'd call FedEx and Staples and ask for pricing, to see if it would fall in line with your price point.

There is no way that 250 color copies will be cheap, even if you use a service like Lulu. Their http://www.lulu.com/publish/books/?cid=nav_bks puts your book at about $48 if you print it with them, which sounds like a steal for this sort of thing. At a copy & print shop, even if you find one that has really low prices, you're still looking at at least $.25/page of color printing (and that's a really low estimate), which puts you at $62.50 for 250 pages even before you get it bound. Keep in mind that there's usually no discount for double-sided printing in color; it's not the paper that's expensive, it's the consumables, which generally run at more than $.10/page for color in terms of cost to them. If you can do a smaller color section (like just the 20 pages of photos) and do the rest in b/w, that will help drop the cost down substantially, but after binding and the like I'd expect you won't get better than about $20/book ($5 for 20 pages of color photos at $.25/page, $11.50 for 230 b/w copies at $.05/page, plus about $2-5 for whatever binding and cover option you choose), and again, that's a pretty low estimate for most places. A good copy shop will help you figure out what options you have, and many copy shops offer "perfect" binding, which gives your books a cover that looks more-or-less like a normal paperback. This binding costs more than spiral-binding, of course.

Would you consider reducing the page size to run 2up? It would halve your total click count, and if the writing is as legible as you say, shouldn't affect readability.

Or offer print-on-demand and a PDF to everyone, since there are likely to be folks who want the story itself but not the cost (or space) of a physical book -- but they get to choose.