An interesting question, certainly.
I know for myself that right now I'm playing most all my games at default settings or better. My CPU's level of performance is pretty much entry level these days, my video card being more low-end.
Holy hell you should see how nice Batman and Mirror's Edge look. I haven't tried Mass Effect again yet since the CPU upgrade, but I'm sure I'll be a noticeable improvement. I'm really wanting to try Assassin's Creed and Prototype while I'm at it (are there demos?).
I think its safe to say that anyone claiming you need a $2,000 computer to play games decently is out of step with what's actually out there. Right now I'm pondering NOT upgrading my video card, an $80 Radeon 4670 running at stock speeds. Why bother? I'm running everything at nice resolutions with good details and steady framerates...