Re the cheapest place to stay in/near Key West, as you already may know, there are limited choices at high prices. The closest I know of from past experience would be Big Pine Key Fishing Lodge (telephone 305-872-2351), Mile Marker 33 on Big Pine Key, ocean side, not far from Bahia Honda State Park, located between Key Marathon and Key West. No web site.
However, Big Pine Key is not exactly cheap at $42 in the winter months for the "rustic camping" dry camping section. No hookups, no pets allowed, and no generators permitted, but OK for a couple of nights. The full hookup sites are reasonably-priced, very close together, but are impossible to get - fully booked by returning guests each year. We requested one far in advance but could not secure one.
Suggestion #1 would be to check the web site often for Bahia Honda State Park in case of a cancellation; if not, go see the office early(check out time is 1 p.m.) to see if there are any sites open that night. Probably not, so then go to Big Pine Key Fishing Lodge. We stayed in the BPK rustic camping section last year during peak season for a couple of nights and it had plenty of empty sites.
Suggestion #2 would be to consider staying further north for more selection. But nothing in the Keys will be cheap.
