will most people know? Depends how interested they are at inspecting your lower wall! :)

Applied molding can look very nice as well. Just pick a nicely scaled molding/design to fit your space.

Depending on the total design equation, I think that real wainscoting looks much more attractive and will probably add to resale value especially when used in formal areas. I don't think that most people know the details around the difference between real wainscot and frames, but they probably sense that wainscot is more substantial and authentic. This is one of the details that existed in homes before WWII, it's a shame that isn't seen more often today.

I assume that you've already searched this site for wainscoting examples to see whether you think that wainscoting makes a bigger design impact.

A few options. If you have any interest in this as a project, there are companies that sell pre-constructed wainscoting. Or, if you're really a hands-on homeowner there is an excellent video about constructing wainscoting by Gary Katz.

I think it really depends on the price point of your home. At resale, most people are not going to pay extra unless it is an expectation for the neighborhood.

Thank you all very much for the information. After much thought, we decided to spend a little more (maybe almost double, not sure yet) and go with the real thing. I will post after pics once completed.