In this post, I'm speaking as a home rehabber only. The window solution for the actual homeowner who lives in their home could be different.
I fix homes to resell. The windows must look really good and work perfectly. Thermal performance isn't that important, but most buyers will pay a little more for double glazed windows. If there are some windows that don't open and close, the home inspector will find it. Then the buyer will probably ask you to fix it, or at least give a credit of about $200 per window.
The homes I fix average about 70 years old. They either have the original wood windows or vinyl replacement windows. 90% of the original wood single hung windows work BADLY. If the vinyl windows are over 10 years old, yes, there is some maintenance and parts replacement required. This work costs about $50 per window.
The rehabilitation of the original wood window with about 10 layers of paint on it will cost about $200, and it won't be as tight as a new vinyl window. It will also still be a single glazed non low-e window that tends to cause some thermal comfort problems in that room.
You can add storms to the inside or outside, but 90% of those are lost or inoperable after 20 years. With thoughtless tenants, this can drop to one year. Cost is irrelevant here, because they don't hold up long term.
I have tried all these different scenarios, and new windows are really the only option. When the home is to be resold, it unfortunately turns out that the cheapest window is the most cost-effective. Consumer education may eventually change this. In some munincipalities, the home must be updated to the new energy code whenever it changes hands. That also solves the problem but adds the other problem of forcing the new price of the house to be much higher, or cause the rehabber's margin to be slimmer. Too much government meddling, IMO.
I was particularly disappointed in the wood window restoration route. Yes, the windows worked again, but they still looked BAD. They were simply too far gone for restoration, and that's the case in 80% of the homes I rehab.
In summary, the window must operate, the payback period is irrelevant. $250 each for new windows is worth it, but I don't spend more than that on my rehabs since it would be wasted.
In the Denver area, another great company for replacements is Gravina. They offer a triple pane window that won't break the bank.