$800 can set you up with some nice AK-pattern rifles. WASRs, Yugos, and Saigas can be had new, and some of the nicer models (Arsenal) can probably be found used. Keep in mind that with the current gun buying panic, you may have trouble finding the gun you want, and when you do find it, you may pay exorbitant prices.
.223 and 7.62x39 are roughly the same price nowadays. You can shoot steel-cased .223 in your AK without any problems, and it runs about $6.00 or so a box at Gander Mountain. It can also be had in bulk. As of late (gun panic again), I've had problems finding plinking ammo and have been relegated to paying $14.99 or more for a box of 20. Caliber choice is personal preference, especially if you don't own other weapons in either caliber. Stopping power is also more than adequate in both calibers, but I wouldn't use an AK pattern for hunting any "larger" game as the accuracy isn't quite there (some Saigas and other exceptions apply), I also wouldn't use it as a "home defense" gun if you live in an urban/suburban environment as overpenetration can lead to SERIOUS consequences.
I wouldn't put a scope on an AK (maybe some higher dollar models), because the accuracy just isn't there and the gun won't group how you want it (again, more of a problem with the WASRs). Also, some of the mounts on the market aren't very good for stabilization. Red dots are a good idea if you feel the need for some optics, the AK sights are acceptable at best.
Wood or synthetic is personal preference. You can always change the furniture. If you plan on hunting or shooting in inclement weather, maybe synthetic would be a better bet, but again, it's all what looks and feels best to you.
Reliability isn't a concern in an AK pattern rifle, at least it shouldn't be. I've put 2000 rounds through my bottom-of-the-line WASR (that includes brass, steel, milsurp, and reloads) and have literally ZERO malfunctions. I'm talking not even a hiccup.
My recommendation is WASR, especially for beginners, it'll get you introduced to the AK pattern and you'll have enough knowledge and confidence to move on to higher-quality guns later down the road.
If you're going to spend $800 might as well go that route for a little bit more and get a very special AK that you don't see at the range all the time.
