Your plan is the one most people getting dentures follow because it does spread out the cost. Another advantage is that it gives most of the gums time to heal before the denture is put it. That often translates to fewer soft relines which contribute to the cost. If you don't mind being without a few back teeth for a while it's as good a plan as any to follow.
For anaesthetic, I have read of people saying they were given "concious sedation" as an anaesthetic. I don't know if it's a needle, pill or gas but apparently you stay wake, are somewhat aware of what's going on around you but feel no pain and have little recollection of what happened. I've read of it being used for full mouth extractions as well as other dental procedures. And of course there is the old stand by - novocaine. It sounds like there's more choice these days than just a few years ago. Unfortunately, you'll have to choose between what your dentist offers or get a referrel to another dentist the uses the anaesthetic of your choice.
$1300, what does that include? It's a little steep if that's the cost of the upper denture alone. In Canada and the US the average cost of full dentures (upper and lower) including extractions, relines and post extraction care seems to be about $5000. It can cost a little more or less depending on how many extractions, the fees the dentist charges, where you live, etc, etc. I would ask your dentist for a detailed breakdown of the cost for the work to be done. If insurance is involved they will want that breakdown too.