chinookservices - there are so many opinions out there about websites and thier affect on a business, all I can do is tell you mine.
I believe you need to divide the effect of a website into 2 categories.
A) People that you have never made a contact with, finding your website through a search engine, or a link from a other site.
(B) People you have previously made contact with and find your site from a link on your marketing, be it a classified ad, a flyer, your business card, ect...
In my opinion the effect on a local business with people from (A) will be tiny to nothing. The reason to have a website is for the (B) people.
I've been told that today a good percentage of people will research a company a bit on the web before they contact them. In other words they will see your flyer and go to your website to get more information about you and to get more comfortable before they make the call. Having a website allows you to make that connection with these people and gives you a chance to silently sell them on your services through examples of your work, customer testimonials and just the fact that people equate a professional website with a chance that the company will be professional to work with also. That being said, is it true to assume a amatuer, crappy looking website could do more harm then not having one at all?