Dear Denise,
Check in the Resources section of this website and in the archived webinars (there was a previous course on digital projects <http://www.connectingtocollections.org/archivedigital/>. You will find many resources about digital preservation and finding funding for supporting such a project.
You are right such projects are tedious and it is really correct that one of the most time consuming parts of such projects is cataloging, description, and indexing of these collections. Access is an important part of preservation. I have found with very large collections like yours, it sometimes helps to begin with a part of the collection that might be the most used. Have you done a survey of what you have? Has the collection had any sort of indexing or cataloging? It is often important to be able to say these photographs are important because they contain images from these particular aspects of our town history – in other words, you need to define why these images are worthy of preservation.
It is a bit late, but you might look at the NEH Preservation Assistance grants
<http://www.neh.gov/grants/preservation/preservation-assistance-grants-smaller-institutions>
The deadline for this year is May 5th.
Also, some states have grants (and sometimes training) for digital projects through their state historical records advisory board – it is worth checking to see if they might be of assistance <http://www.statearchivists.org/shrabs.htm>.
I hope that helps.
Susan
C2C Care Online Coordinator