Covers: yes. Copies: generally, no. I like to think I'm adding something of myself when I do someone else's song.

As regards costs, I have only dobe promo CDs thus far, and the cost is trivial (in the UK at least): so long as you don't charge for a copy and have the "not for sale" disclaimer. (otoh, I have been know to give some away at gigs for a donation to charity. Which seems like a win-win-win situation to me.)