The 7 Series by Follett is really the cheapest version out there of what you are looking for. While the demand for specialty in-home ice makers is high the truth is that most people aren't prepared to pay the amount that they actually cost.
Pretty much all major brands of ice machine manufacturers make ice and water dispensers (i.e. Hoshizaki, Manitowoc, Scotsman, Ice-O-Matic, etc.) If you can't find anything in an undercounter application maybe consider a counter top model? That may lower your price as well.

Don't give up though. I wish I could tell you that you will find a good deal but honestly in the time that I've worked for a kitchen equipment company I have yet to see a home ice & water dispenser for less than $1000, even when it is on sale. Look for free shipping, too. Our company is always offering free shipping on ice machines so I'm sure there are other offers out there as well.

Good luck! And if you find a reasonably priced ice & water dispenser be sure to let us know, I've been wanting one of those for ever!

Why not just buy a cheap fridge/freezer combo with the water and ice dispenser and put that in a pantry or utility area? You can find an inexpensive fridge for under 1K easily and it will serve as "overflow" for both your fridge and freezer and consume MUCH less electricity and water than separate dedicated units.