I use cloth, and I wash the diapers myself. Honestly, I have found it very easy. Toss diapers in wash, cold rinse, hot wash, cold rinse, dry. You just have to make sure you use a detergent that is OK for cloth - steph at babywearboutique sells one.
I am not a fan of prefolds, except for the first few weeks. I find prefolds on bigger babies are more prone to leaking if you don't get them on just right, and I never managed to master that part. But I make my own diapers, so I'm able to customize to be exactly how I want (I make All-In-One diapers, that are basically exactly like disposables except instead of throwing them away you wash them!). These are the diapers I use :
http://purplelizarddesign.blogspot.com/ ... stash.html
The only time I ever get leaks is when I leave her in them too long and they get full.
On the rash issue, I actually find my second baby, the cloth diapered one, has WAY less rash issues than my first baby did (and the first was in disposables). The lining in my cloth diapers is a high tech athletic wicking fabric, so she actually stays really dry and rashes aren't a big issue.