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There are currently major unsolved problems with step 2.

https://cpb-us-w2.wpmucdn.com/research.seas.ucla.edu/dist/d/...

We have some ideas, of course. The rough idea is: surround the reactor with a lithium blanket. This gets bombarded with neutrons, breeding fuel and heating the lithium, which transfers its heat to coolant to spin turbines. The devil is in all the engineering details, like: how do we make alloys to deal with neutron bombardment/hydrogen embrittlement, what's the optimal geometry to capture flux while being serviceable, etc.

Much of that work can and is researched in parallel, but there will be inevitable integration hell that has a burning fusion reactor core as a prerequisite.

What is done with the “spent” lithium blanket? Is it radioactive waste?

It depends on how it’s engineered. The lithium itself wouldn’t be “radioactive waste” but the vessel for the lithium would likely be.

10s of billions... Over many decades. We spend very little on fusion research overall.

ITER itself costs $21B (over a decade).

Globally we are definitely spending $10B+ per year.