Does enchanting really destroy the gems used? If so, enchanting seems more expensive than simply buying enchanted weapons, since you need to constantly buy big soul gems (since they're hard to find). I feel like I wasted 1600+ hard earned gold by losing those gems...
Yes, enchanting destroys the gems. So does any other method of actually using them as anything but decorations.
As to the cost, if your enchanting skill is decent, its a bargain, and lets you make variations / duplicates of stuff you find or buy (IE a flame sword instead of a flame bow). If you skill is good, you can make better stuff than you'd normally find for sale or otherwise. If you skill is REALLY good, you can make stuff that beats pretty much all other gear in the game.
1600 gold may seem a lot at some levels, but when it lets you crank out armor that adds 60+ to health AND +25% to your weapon damage .... at that point, 1600 is chump change.