To add to what JoB said, a 'substantive' editor is not going to make the changes for you. She will point out the problems and make suggestions. You will have to make the changes yourself if you think they will improve your book.
And don't neglect the copyeditor. It's impossible to spot all your own mistakes.
Definitely. A "substantive" or development editor looks at your story's big picture: characterization, plot development, inconsistencies, and probes for areas that could be strengthened. She will make a lot of suggestions, but it is up to you to apply them - if you so choose. If you want the development editor to review what you've done in response to her suggestions, that would be something to work out in your agreement with her. (Do you pay twice or is the original fee all-inclusive?)
Development editing is not the same as copyediting. They are completely different things and require a different mindset. You may be able to find a development editor who also does copyediting (I don't know, I haven't looked) but one skill may be dominant.
If I were doing this (and this is something I've been thinking about for a couple projects), I would first find a couple trusted beta readers and get the manuscript into the best shape I could that way.
I completely agree. If you're going to use the services of a development editor, go as far as you can with your manuscript on your own, and that includes making use of beta reader and fine-tuning the spelling, grammar, etc. to minimize the time the editor will spend time on them (and you will pay for).