Hi Rutters,
You should be able to get a 3-course meal for 2 with drinks for about 30-35 euros. Most restaurants do a tourist menu for about 12 euros per person if you're on a budget and these usually have a choice of starter, main course, dessert and coffee although they can get a bit samey. Drinks aren't too expensive - we had heard it was a pricey place to go and were pleasantly surprised.
Hope you have a wonderful time - it's a beautiful place especially if you get out of Funchal.
Roswell