I'm not up to speed with the latest developments with colour laser printers but last time I checked (a year ago or so), inkjet quality for photos was still significantly superior to colour laser. Colour lasers are also more expensive as units but a little cheaper to run than inkjets, although still quite expensive compared to B&W lasers.
As for paper, the best you can get! It makes a huge difference. You'll probably get the best results using the printer manufacturer's ink with the printer manufacturer's best paper. Mixing different manufacturers for printer/ink and paper can give mixed results.
Search the web for reviews on inkjets. Improvements are coming all the time.
The only advice I would give is to factor in the running costs. Check out how much the cartridges and paper are. How long does a cartridge last? Buying the cheapest printer won't necessarily work out cheapest in the end. Inkjets cost quite a lot to run!