I think newbies should open a small real-money account to have fun with forex while learning. I had had a $1,000 real-money account just days after I discovered forex, and I blew half of it for blind speculations. Although I lost, I was satisfied with my trading, since I traded in forex for real. The experience was real. Winning and losing were real. Emotion was real. Had I trade on demo, everything would have been fake and dull. I would have had no real motivation to pursue forex trading.
So after I blew up half of my first account, I waited for the right moment to fight the market back--No i don't mean I wanted to win my money back. My goal was to make a lot of money, not to get back what I lost. I had to learn more. I needed good strategies to fill up my blanks that made me lost. I followed some free systems, test run them on demo accounts, until I went live when I was confident that my system's working consistently for several months. At least I must know first that the profits are made by educated trading, not by some kind of luck or randomness.
Demo saved me thousands of dollars. If I were to trade the systems with real money, I'd have lost a lot. I used demo to try out many systems made by forex communities, and I made revisions so on and so fourth until I got a profitable system. In short, demo accounts are good for trying out ideas and systems. When the system is consistently profitable, I run it live, first with small mini lot for several days and increase to 1 standard lot shortly after.
The bottom line is if you have a thousand bucks to spare (lose), deposit it in a real trading account. Make good use of the money by trying out the strategies you have just learned (i.e. moving average crossover, support and resistance, trend line, Fibonacci retracement, other indicators, etc). If you lose, come back here and learn more until you have managed to up up up your equities.