That's the thing. Demo will only work if we think that we are losing real money, else it would be just waste of time. Thus Demo is only effective if done seriously.
Manual trading on demo is useless I use HF demo only for strategy tests, tick data, coding etc. the rest serious is on live.
I think starting with small amount is a good idea to test any broker and its processes like withdrawal etc. however 2K is good amount enough for making good ROI.
Investing that much amount will only be beneficial if you have much confidence in yourself and also if you have good amount of experience. Starting out new with that much will be a lot of risk.
I guess it can also be helpful in balancing margin requirements however traders should not invest the whole amounts at once but they should take calculated risks according to what they can afford to loose.