How to respond when entering shop?

Sometimes the shop owner will greet you by saying something as soon as you step in.

How should we respond?

This has been discussed several times before in this forum. I recommend to slightly nod with your head. If it is a very personalized greeting, I would greet back with a "konnichiha".

most people usually at least look at them and give slight recognition and then continue on their business. They hear it so often everyday that an official recognition gets dreary.

With irrashaimase I don't think it's necessary to respond unless they look you right in the eye as they say it (rare).
If they smile and say "Konnichiwa" like they do in American chains like GAP and Starbucks then I smile back.

It's different to my home country where the shop assistants will also ask "how are you today" and talk to me more like a friend than a customer.

Different shopping culture here.

how about when you leave? just a nod again or can you say arigatou or sayonara?

I don't think sales clarks expect customers to respnd to them. Many Japanese simply do not say anything.

I say "konnichiwa" and "arigato", when I received any help. I also realize I sometimes say "domo".

You really don't have to say anything. If you feel like you got exceptionally good service then fine, but normally for everyday stuff and interacting with clerks, cashiers etc. you don't have to respond or say anything.

Clerks already know that they'll probably receive no recognition when customers enter and leave. In fact, I did give them some recognition at first, and they looked really surprised. "why did she say thank you and bow?? Who does that??"
It's just part of their job to welcome you, even if the meaning has lost it's value.

reciprocate with what is given.

konichiwa-konichiwa
bow-bow
smile-smile
wave-wave

When I was in Honolulu in May 2007, I entered the DFS Galleria, and the staff at the entrance said "Irashaimase." which means welcome. All I did was smile and bow my head slightly.