moridin:
If I may offer some suggestions based upon the mistakes I have made and seen over the years (when looking for advice I have found the guys that are most useful are not the ones that only have success stories, but the guys who have made all the mistakes I would rather avoid

). The least often asked question when determining what steel to start out with , and ironically perhaps the most critical, is what equipment do you plan to work it with and what properties do you desire in the final product.
The only thing about O1 that is great for a first time maker is the fact that it will harden quite well with little effort, but so would a lot of other alloys that would never be considered introductory. I feel the many other complexities of O1, outweigh this one benefit.
Let me first congratulate you on your healthy attitude towards good steel, "it seems that a 13 dollar piece will make me 2 or 3 knives...seems like a fair price to me..." If it makes good knives the first time, it would be a fair price at $30 a pop, as opposed to the outragueous price many begginers pay
by monkeying around with "free" scrap, mystery steel only to find that the end products properties are a mystery as well (or worst yet, having the customer find this out for you

). No intention to preach here just, expressing my pleasure at hearing a new guy recognizing the cost benefits of good steel.
Reading your posts tells me that you want to at least start out with simpler tools, a wise choice for the begginer and perhaps more enjoyable, I often fall back to a simple charcoal, bellows and files setup when I want a break that I can enjoy, from the monotonous grind of full time making. But the tools you have tell me you want a steel that will respond best to them. Simple tools work simple steels the best. I would recommend 1070, 1080, 1085, W1, W2 or perhaps even 1095 for a guy starting out. While O1 will harden fine for you, it can be a bit finicky in the forging and will not reach its full potential without tighter controls over the heat treating temperatures. One good example of this would be your box of wood ash or vermiculite for annealing, you will not soften O1 very well with this setup but any of the other steels I mentioned above will come out dead soft from it. Many of the old blacksmithing methods were developed when only those simpler steels existed and are incapable of competely handling the needs of richer modern alloys.
As for your starting stock size, when forging you always want to start thicker and then forge down to your final dimensions. If you want a knife blade 1-1/2" wide by 1/8" thick you do not want to start with a bar that is 1/8" thick You would go with somethign that is 1" or 1-1/4" wide and 1/4" or 3/16" thick and allow the steel to get thinner and exand in width to your desired dimesions.
Any of the steels I have mentioned will produce fantastic knives, I use O1 all the time and it is one of my favorites, but after making my mistakes, if I had a selection of steel that included all the ones mentioned here, and I had only a hammer and a campfire to make a knife that my life depended on, I would save the O1 for back at my shop and choose one of the others.