I'm in Holly Springs, NC and re-did my lawn last summer. Luckily the lawn was established before the drought was made official and water restrictions were in effect. My bermuda looks great, although it has some weeds--which I'm about to take care of with some RU. If I were you I'd go with bermuda. The NC legislature is trying to pass a bill that will force differenct manicipalities to share water supply systems when necessary. This means that Cary and Apex will share the Jordan Lake resevoir with Raleigh and Durham when their reservoirs are too low. What does all this mean? It means water restrictions could become more of a state mandated thing than a city or county thing. Fescue needs too much water and who knows when you'll be able to water with your sprinklers again. Just my 2 cents.

You can hope it doesn't come back, but if there is crabgrass seed in your soil (odds are good there is), it will come back. Crabgrass is a warm season annual. It germinates when soil temps are above 60 degrees for three to seven consecutive days, flourishes in late spring till frost in fall. It can lay down a lot of seeds in your lawn, that will lie dormant till next year. It is pretty late in spring to seed a lawn now, you would be well advised to wait till late summer, around Sept. 1-15. If you seed now, the only way to prevent crabgrass germination (if it hasn't started yet, not sure of your soil temps in NJ) is by using Tupersan, and using it every 4-6 weeks. It won't affect turf seed, it will however prevent crabgrass from germinating. It isn't cheap however. If you wait till late summer, you can put down a stronger preemergent called Dimension, which will prevent crabgrass germination for about 3 months. For cool season grasses the best schedule is preemergents in late winter/early spring, spot spray weeds in spring and summer, seed in late summer/early fall. If you don't need to seed then another round of preemergents in late summer is recommended to prevent winter annuals like poa annua from germinating.

Yes, don't get too anxious. You made a mistake in seeding in the summer. Crabgrass seed was waiting there to get wet for a whole week. You had to do that for your grass seed so now you have crabgrass. This is one of the two big reasons why you should never seed in the summer and/or spring. Fall is the time to seed because at that time the crabgrass seed is no longer sprouting. Do not wait until spring to overseed. Do it at the end of summer when the night time temps start to fall. Oh man. I just noticed you live in Zone 9. Where exactly do you live? This is important. You might not have any fescue left by 4th of July. Fescue is bad in zone 9 and dwarf fescue is twice as bad. But there are some places in zone 9 where fescue is perfect. Need to know where you are.

I agree with Eddie on the roundup. Wal Mart sells their brand of roundup that works fine and saves a few dollars. Gardening while cheap isn't always free unless your time is worth nothing. Unless you plan on planting a lot of perennials, clay soil is fine for most shrubs. The root zones extend far beyond any hole you would amend and is actually preferable. I would kill the grass with roundup. Till everything under (3 weeks later) and plants shrubs or perennials. If you don't have a tiller or want to rent one, that's ok. Just dig big holes right in the dead grass. I would sow my seeds in starter pots and when ready, move them to the ground in the fall. Otherwise, you will fight weeds and it's a hassle. I would plant, however, cosmos, sunflowers, and morning glories only because they are so easy! And grow best by seed anyway. Go to plant swaps also. Many people have plants other gardeners don't want because they already have them and will give you plants. Like liriope or hydrangeas. In our county, they have mulch that costs $10.50 for a pick up load. I've been using it for years, as do many professional landscapers, for that matter. See if it's available where you are. I mulch everything! It keeps the weeds at bay. Lowes and Home Depot often put shrubs on sale in the late summer. This is a good place to pick up things cheap. I have bought 3 gallon knockouts for $4.00 that were priced at $20 in May. Eventually you will have so many plants you will only want the best varieties.