re: What would you do - encourage your child to have an extravagant wedding or take the money?

While I think that weddings are important, the success of a marriage is inversely proportional to the opulence of the wedding.
People have these silly Disneyesque expectations and this type of focus is a poor start to what should be a lifelong relationship.
Get a church which you share and set up a simple, but warm event and enjoy your start from there.