Hey Rick,
I imagine this response is ultimately late to be at all helpful. But if you live anywhere near a city, a little trip might be the most cost effective way to get a bike. I find local used shops pretty good actually, though you just have to be persistent as all of those shops frequently recycle their stock. 

As to craigslist I know a few people who found some alright bikes for around 100-200. It might be worth it to get a cheap one from craigslist and immediately take it to a shop. Though as far as internet sites for bikes goes craigslist is probably your best bet. It's really all about patience, yeah the guy that told you most of those bikes are pretty bad is right, but eventually a good one will come by. 

Hope you found this helpful or that you even already found one months before this post.

I'm actually about to try my hand at putting a bike together myself if anyone has tips or a good manuel I good look around for. Parts are very salvageable on the streets of most cities I've been around lately so it seems very much possible that this is a good way to get an alright city bike for cheap. 

Well, here is another late reply. I live in the Phila. area, and there are several good used bike shops here.     Via bicycles on 9th near South is a big, greasy cavern and has lots of used bikes and parts.   Buy used or just build your own.  
Bicycle mechanics is  quite easy, and you can farm out the difficult parts like building wheels, if you want.   I built myself a nice townie bike from an old frame and parts that I had around.  For gears, I bought an old but unused Sturmey Archer 3 speed  from Via,  vintage 1960, still packed in the original cosmolene. 

To find a decent used bike check out thrift stores, goodwill, salvation army etc. plus yard sales etc. to tap into a huge resource for finding quality bicycles that just happen to be older. 

Church sales often have some great bikes found nowhere else used.