I built my own rack out of 3/8" stainless steel rod because the LBS told me no one made racks that would fit disc brakes. Of course, I later found out that was false, but it was too late by then
I did it all with an oxy/acetalyne welding setup. The gentle bends I did by bending the rod around a round wooden block, tight bends I did by heating the rod with the torch then bending it (to avoid cracking). If I had it to do again I'd either do it with aluminum (which is harder to weld though, especially oxy/acet) or 5/16" rod. The 3/8" rod is seriously beefy, you can pick the bike up and swing it around by the rack. Overkill and heavier than necessary. 1/4 would probably bend too easily though... but you could get some and try it out. Obviously on a folder you're very weight-conscious.
Stainless (308 I think was the type I got, but it's the most common type if you're at a metal supplier) isn't too hard to weld with a torch, use a carburizing frame (prevents oxides from forming) and quench in water as soon as you're done (prevents it from losing its corrosion resistance). I used stainless filler rod too, from a welding supply store (tell 'em you want stainless TIG filler rod, since most people don't weld stainless with oxy/acet).
If you're going to use a MIG welder I'd say go aluminum since MIG-welding aluminum is easy. Forget about bending though, just cut pieces to length and weld all your angles (at least for tight corners... if you have gentle bends you can probably bend the rod). If you're going with stick-arc then I think either aluminum or stainless is doable. TIG ditto.
If you want metal to play with, find an industrial metal supplier near you and go to their warehouse. Ask 'em for "drops" or cutoffs... less-than-full-size pieces left over from some other order. If they have any they usually let you have 'em cheap (by the lb). Even if not, if they'll sell you a single piece or two (since the rod comes in like 10-ft or longer pieces, you aren't going to need very many) it'll be pretty cheap (I think it was less than 10 bucks for like a 12 foot piece of rod).
Of course this all depends on YOU knowing how to weld
. If you don't, probably the cheapest option is find a freelance welder near you (if there's a community college or technical school that teaches welding, ask around the dept, or call a welding shop and ask if anyone does side work) and have the whole thing pre-assembled with a wooden frame or something and the pieces clamped. Design it with as few welded joints as possible obviously to cut your costs, and try to have them easy to get at (if necessary he'll tack-weld them all first, remove the frame, and then weld them for real). Oh and the frame better be disposable
. BTW you better explain BEFORE you get there what kind of metal he'll be welding (he'll probably ask, but just in case, you don't want to find out he only does steel and you're asking him to weld aluminum).
Oh I did leave regular old steel out. It's the easiest thing to weld, but it rusts, so for a commuter bike I don't like it as an option... however there's always paint.