So is $250 enough, too much, or too little as a gift (for mustachian standards)? And is cash a bad idea (I've never been to a wedding here in Canada so I wouldn't know)? If so, what is a good generic wedding gift (you can tell I'm clueless about this stuff, right)? We were also planning on using our travel points to cover the hotel but since the bride said we can crash at their place we get to save our points. So does this give me room to be more generous with the gift?
To echo what others have said - that dollar amount sounds very reasonable for a gift for the marriage of someone you have such a close relationship with. I got married last summer, and we did not have a registry. This was actually very intentional - we didn't want stuff, and not having a registry was a signal of that (so ... perhaps that is the case here). This meant that when friends asked if we had a registry, we could gracefully deflect and say something along the lines of 'Nope, no registry - living in a small apartment, we have to be cautious about accumulating kitchen and other stuff". So I would recommend asking the couple if they have a registry for gifts - this would allow them to deflect the focus away from stuff for gifts (if they'd prefer money), or alternately let you know they'd love to upgrade their kitchen with stuff from Crate & Barrel (or whatever - then gift accordingly).
It's totally your call on whether them letting you crash and not pay for a hotel changes how much you'd like to give - on one hand, I think a lot of people probably don't tie their gift-giving precisely to their expenses (i.e., I've paid $350 for flights to a wedding before ... I've never given that much as a gift, even to a wedding that was low-cost. But I have felt really appreciative of the friends who got married and provided accommodations to me, their guest, and been more generous in my gifting.)
Just wanted to put in my 2 cents about how awesome money is as a wedding gift ... simply the best, in my opinion. You can combine it with other people's cash gifts to buy larger things - fancy kitchen stuff, furniture, take a trip, fund investment accounts (what we did :)), etc. We mostly got cash - a bunch of my girlfriends (including my bridesmaids) didn't get us anything, which is cool. Some people surprised us with their generosity - many couples gave $200, single people gave $100, and some of my husband's family gave checks of $300 or $400, which totally blew my mind.
One idea that might be cute, since you're staying at the couple's place, is to put together a nice package for them to come home to after the wedding (or honeymoon, or whatnot). So maybe put together a nice basket of their favorite snacks or whatnot. Maybe a movie they like but don't own, a bottle of wine? Or if they're not going on a honeymoon, perhaps stock their fridge with food and get some flowers so the place looks nice? In my experience (and that of many friends), the days around a wedding are hectic, or at the very least schedules are all messed up and daily-life habits (like grocery shopping) can sometimes fall by the way-side because you're doing so many things you wouldn't normally be doing. So maybe stocking their fridge and making some nice meals while you're staying with them would be the most appreciated.
Also, you can never go wrong with a thoughtful card!