Lego has a far better resale price than Duplo or Primo on places like eBay! You rarely see lego at a good price at car-boots but they often have Duplo. For a 2 year old by all means buy the big stuff but I wouldn't go mad- save your pennies for the proper lego. My DS1 has played with his since he was 4 or 5 (he's now 8 and showing no signs of stopping!) and it's by far and away his best toy. The big stuff IS compatible with proper lego but 5 year olds aren't interested in combining it IMO. Maybe you'd be better buying cheap Woolwoorth's own brand type bricks at this point, even.
Mega blox (sp?) are cheaper but we've found they don't join and hold together nearly as well as lego does. Megablox is good for the 'pirate' sets that interest 6-8 year old boys, but I wouldn't regard them as being compatible with lego, really.
A hint, and you can tell what a cheapskate I am here!- when you buy new lego sets, photocopy the instructions and save the original box and instructions. Down the track you'll find your lego is worth far more with these! You can download lists of which bricks are in each set on -is it 'Bricklink' website? so you don't need to worry about keeping it all intact. And for the real purists you can buy individual missing bricks from sellers on Bricklink!
Whatever you choose to do I can't praise lego enough as an excellent toy.