What to use for chocolate flavouring?

Drinking chocolate is a bad way to flavor a cake. It consists of cocoa powder mixed with sugar, and has nowhere near enough chocolate taste.

The correct way to flavor a cake is either baking chocolate (the real thing, not "fat-containing cocoa glaze"), or cocoa powder. You should choose the one to use depending on the recipe; don't just add it to a normal sponge cake recipe, both change the texture. Cocoa powder is easier to use, as it will only add starch to the cake. Baking chocolate will give you a richer texture due to the cocoa butter it contains, but finding a good recipe for it is more complicated, as the classic proportions have to be adjusted not only for the starch, but also for the fat and sugar it adds. Also, the fat it adds can't be creamed, which interferes with leavening, and it has to be melted before adding it to the cake, which requires some skill (mostly temperature control) and is something I would recommend for an intermediate rather than a beginner baker.

In short, find a good recipe which uses cocoa powder. Drinking chocolate is not only prohibitively expensive, it also gives an inferior result. After you feel more comfortable with cake baking, you can consider advancing to recipes which include baking chocolate. My personal favorite are Desaulniers' recipes, but the Gourmet magazine recipes are probably more accessible, as many of them are freely available online (try searching on Epicurious). You can also look around for other sources; I would advise against trying out random recipes off the Internet before you have gathered enough experience to be able to judge the quality of the results by just reading the recipe.