Given your budget and printing requirements, I would without hesitation recommend the Epson D88. BUT, you say that ability to print photos with compatibles is a must and my experience with compatibles has always been horrible, especially when trying to get any kind of colour consistency in photos. I am just in the process of trying Choice compatibles with my Epson (several forum members recommended Choice) and I have to say that I am no more impressed than I have been with any other compatibles I have tried.
So, Epson D88 with Epson originals - yes, but for photos with compatibles I would not know what to recommend. Best of luck, hope you get some useful suggestions.