I just got back this morning from Munich. Since TexAgs was such a good resource for planning my week long trip throughout Bavaria and Oktoberfest, I'll be putting together a very detailed thread on my adventures that should answer a lot of questions. Hopefully later today.
But to answer your questions here, I booked through airBnB and stayed in an apartment about 3 blocks from the park. It was about $200/night, but that was months ago. Hotels are not possible. Hostiles and campgrounds may be your only options, but I wouldn't recommend it if you're over about 25. We talked to lots of teenagers & 20-somethings who stayed in a campground somewhere near there. The campground provides dome tents (lined up so close that they're touching) in dozens of rows for as long as you can see. They provide hot dogs all day long, a BBQ social every other night, a warm breakfast daily, free beer 24 hours/day, and the dome tent...all for 50 Euros a night. Lots of drugs, drunks, random hookups, carnies, and very little sleep, but they all said it was safe & fun. There was still lots of room left on Sunday, but I'd only recommend it if you're a poor undergrad.
AirBnb is probably your only option, but it will be very expensive and likely not nearby. But getting around by train/subway/bus is very easy and affordable.
We decided to wait til Sunday for Oktoberfest since we figured it would be too crowded on opening day. We went to the Hippodrom tent (one of the Spaten tents). We waited in line about an hour or so before they opened but didn't need to. It wasn't actually full until around 11 or 12. You'll find a spot for 4 or less people by noon with no problem. Reservations are only necessary if you have a group of more than about 6 or so. Otherwise, just walk up to a table with some room and ask to sit down. Everybody was cool as hell and would love to have you. Hippodrom is probably middle of the road as far as popularity goes. There are much more rowdy tents, but it certainly wasn't family friendly. By 4 or 5pm, 80% of that tent was shhht-faced.
No fights. No pickpockets. Nothing scary like you'd see in America with that many drunks in one place. Just a bunch of fun people loving the chance to get hammered and become best friends with strangers from all over the world for 4 or 5 hours. We did see one guy outside with a bloody nose getting arrested for stealing though. We're pretty sure the cops did it to him. So don't steal.
It costs nothing to get in to the park or into a tent. Beers are only sold by the liter. Most tents only serve 1 flavor of beer. Ours was basically a light beer, but was stronger than the pisswater we'd get over here as a light beer. Beers cost 10 Euros (including tip)...which sounds high until you realize it's a liter which is like 4 beers in America. The food is awesome, and yes there are English menus on request.
There are lots of websites explaining the different tents, how rowdy they are, the beer they serve, and how good the food is. Just google it.
For those of you interested in other entertainment in Munich, there are about 30 beer gardens throughout the city, many of which seat 1000+ people. The outside of some of them don't have waiters or food, so you have to go up to the outdoor bar and get your beer...but not all of them. I don't think they ever close, regardless if Oktoberfest is going on or not. Lots of restaurants throughout Marienplatz serving traditional German food & beer, but most have special menus for Oktoberfest that limit the # of food options and jack up the prices. We typically ate for about 15 Euros per plate before beers on average.
I didn't see many traditional bars, lounges, or dance clubs, but I'm pretty sure they're there. Schillerstrasse which is a street halfway between Oktoberfest and Marienplatz is basically the redlight district. Tons of seedy strip joints if that's your thing for late night fun.
[This message has been edited by taint98 (edited 9/24/2013 10:12a).]