My wife and I cloth diapered both of our children. In addition to being radically cheaper it also resolved rashes/eczema in both kids as well as accelerated potty training. There is an 'ick' factor but liners and a toilet sprayer take care of 99% of that.
We have also noticed, like you mentioned, that cloth diapers are easier on the babies' skin and makes potty training significantly easier.
For anyone who is reading this and may be interested in cloth diapering: Get some quality covers and then buy a ton of flour sack towels. They make the best inserts. Super absorbent, cheap, and unfolds to a single layer, which means they get cleaner and dry faster.