How does Javascript use affect 508 Compliance?

As background, I currently develop for a university, and we have problems with departments demanding "web 2.0 content" and accessibility requirements.

How do really big sites that are JavaScript based deal with 508 Compliance? Some sites degrade, and others require enabling JavaScript. How much impact does one decision have versus the other?

Also, in a realistic sense, how much development time should be devoted the accessible versions of sites versus the "main" versions?

Solution

I'm a blind developer and find it possible to use many Web 2.0 sites - this is most certainly possible.

Firstly, I strongly advise against making a separae accessible site, regardless of how many people advise you to do this. This is bad practice and will end up being more work, even if it initialy seems simpler.
Next, try to use progressive enhancement (particularly if this is a new site). Code the site without any Javascript; it's not just accessibility which benefits. Then, in your OnLoad() go through and attach Click events to the anchor tags; this way if you have Javascript you'll see the Ajax version, otherwise you will have a full page refresh and see another HTML page.
Luckily, there is a new standard, WAI-Aria (www.w3.org/WAI/intro/aria.php) which makes this much simpler. You attach attributes to HTML tags to identify the semantics of an Ajax control, for example. The only problem with Aria is that it only works with newer screen readers and web browsers. The university may well require the site be accessible to people running older software.