For engraving? For straight line engraving I use a non spinning spring loaded engraving point. There are several on Ebay. Used to be there was only one for about $179 USD, but there is now another cheaper one. I got mine from one of the guys on the Zone. Now that I have seen his I could make one on my lathe easily enough. The hard part is finding just the right spring. Depending on the point chosen (or made) it works on a variety of things. I have even used it to engrave the curved side of relatively large sockets to see how far I could push it.
What are you engraving? I found this type worked very well with a sharp carbide point on steel or hard aluminum, but for plastics a rounded point worked better and "pressed" or embossed in the marks. You can also get diamond tips for engraving really hard stuff like glass.
If you are routing out you can get a Harbor Freight flex shaft tool with a handpiece with chuck that will handle .125 shaft bits for about $50 USD and it only has a couple thousandths side play. I can't feel it in mine. It free spins about 15,000 rpm, but if you load it down with deep passes it slows down. I have two of them and I sometimes use them in my mill with a home made bracket that holds two of them so I can destroy two work pieces at a time. I hang the motor on the wall and clamp in the handpieces. They actually have less sideplay than the $50 Foredom (no motor included) hand pieces, but for a lot of work the $135-$150 Foredom 25 continuous duty handpiece would be better because it has bigger bearings and sideplay down around .0015.
If you are hogging out larger lettering in wood then the cheapest thing that's halfway decent is probably a Makita Router and your own mounting bracket. Thei trim router turns about 28,000 RPM.