I am also in the market for a small, cheap forge. Mostly for portability's sake, I'm a very mobile person.
What I'm working on now is an idea I got out of one of the knife rags. Basicaly, take a fire brick and bore two holes in it, one lengthwise through the center and in one side and out the other. The other hole is bored through the wide side and intersects with the lengthwise hole but it stops when it joins up with the lengthwise hole instead of going all the way through.
The theory is, stick your steel in the long hole that goes all the way through and put your torch in the other hole that goes only half way through.
I don't know how well this will work, because I'm still drying the fire brick which has been sitting outside in my pile'o'masonry for several years. This is best done in the Sun or in a toaster oven at it's lowest setting. BUT DO DRY IT!! If you heat up a wet rock or brick it'll blow up with cataclysmic force! I learned this making a campfire when I was young. Caught some shrapnel from it. Woulda been worse but I took off at superluminal speed when I heard the rock pop. Thought somebody was shooting at me, it's louder than you'd think!
Oh, and you can use the toaster oven to temper, but not harden, your blade. But you'll want to get a high temperature thermometer from your local welding shop, as the built in thermometers are said to be unsuitably innacurate for heat treating.