It's really not that much bigger than the interior sets they'd construct on the swing stage for a given episode. Compare it to, say, the Oracle room in "For the World is Hollow and I Have Touched the Sky and My Gosh, This Is an Awfully Long Title, Isn't It?" A similar amount of wood (presumably) and paint and decorations to suggest alien script, just put together to represent the outside of a structure rather than the inside. The biggest difference is that it was trucked out to the Franklin Reservoir instead of erected on Stage 10.
As for the budgetary issue, "The Paradise Syndrome" was the only extended location shoot in the entire season -- the only other exterior shooting in S3 was the swordfight scene in "All Our Yesterdays," which I assume was on the backlot. So the lack of location work elsewhere in the season would explain why they were able to afford a fairly elaborate location shoot in this one episode.
Oh, and would "prop" be the right word for this? A prop is something used or handled by an actor. I'd think this might go under the category of scenery instead. The actors do interact with it physically, but the same would go for a fake building facade on the backlot when the actors go through its door, say, and I don't think that would qualify that facade as a prop.