[staunch]

IANAL.

Fair market value is pure hand-waiving in the beginning. Make it $400 or something. You could easily argue that the value is $400 because your position isn't at all secure (the company could easily fail).

Also, don't forget that you can contribute IP as payment for your stock. No reason to pay cash.

Your understanding of the 83b election is correct. You pay no tax until you realize a profit on your stock. The 83b lets you elect to be taxed immediately (at the same price you paid for it) which means a net gain of zero, thus no tax liability.