In the update it says the bride is perfectly willing to compromise on the OP cutting her hair, but requests she please not dye it. And honestly, shorter hair probably going to reduce the cost of having it styled.
And the bride is probably thinking none of her sisters had to cover the costs of the bridesmaid's hair & make up so the family precedent has been set the bride doesn't cover those costs - the OP did not pay for her bridesmaids (including her sister, the now-bride) why should the now-bride pay for OP's?
And I agree, while its not cheap, $130 is pretty standard/low for a bridesmaid dress.
Considering the now-bride was 12 when the OP got married I'm guessing its been 5-20 years since the OP priced out a wedding. Prices haven't changed much in 5 years, but in 10-20 years they have changed a lot.
As for the whole idea of bridesmaids getting together and picking the dress they want, together - OP how willing and able have you been to meet up with the other bridesmaids and go over dresses together and flip through magazines together to pick out hair and make-up? Its great when that happens, but when the bridesmaids don't get together and do it, the choice is left up to the bride because, well... someone has to.
And finally when it comes down to cost, I see no reason why you can't come to a compromise - you go get ready with your sister and the bridesmaids, but you do your own hair and make-up instead of having it done for you. So long as you really are able to do as good a job, that's a reasonable compromise. you are still there physically but you save the money.