here's what my $.05 collimator looks like. It's just a translucent (white) film container with a 1/16 - 1/8" hole in it's center. It's a little small for the eyepiece holder, so I have tape wrapped around it to bring it up to the proper diameter. I used electrical tape at the bottom, later adding clear scotch tape farther up where I need light to enter. An improvement would be to add crosshairs at the bottom, but you can do quite well with this and then star test to fine adjust.
here is the collimator in the eyepiece holder of my 6" scope. Leave about a 1/2" inch sticking out ot the holder- this supplies light to see the dot reflection. When the center dot of the primary mirror lines up with that of the hole in the collumator it's done.
I'll be adding more details soon, including photos of what you actually see. In the meantime, see Mel Bartel's page, he goes into nice detail on using a collimator: