You seem to forget that Mac hardware (iPod included) is extremely overpriced

Why is the iPod overpriced? Until recently, the retail price of the hard drive it uses alone was $400. Add to that a battery that actually lasts 10 hours or more in practical use, and an MP3 player that has firewire hardware and a decent LCD+interface, and you have a great value for $400. People seem to forget that the smaller it is, the more it's going to cost. Please refer to Slashdot comments on how the empeg is overpriced because they can build a PC and put it in the trunk for much less...

Other Mac hardware? I'll agree to some extent. You often get very good features for what you pay for though. The TiBook I am looking at has features no other high end laptop has, like Gigabit ethernet, and a 6 pin firewire port among other things. I spend $2500 on a laptop, and expect some awesome features. And the low end iBooks are very competitive to PCs in that price range ($1200ish)

Apple's desktops also have been priced alongside workstations of similar caliber, and most are now below what you can find an equivelent Xeon based system for.

The iMac, lets see what $1800 gets you. A 15 inch LCD, a DVD burner, a fast processor for the OS and applications that use it, the best consumer software for editing video and burning DVDs, and a computer that is nice and compact. Find me a PC that has all that, keeping in mind that the movie editor in XP is nowhere near iMovie, and add in the price of a DVD authoring package.

True, there isn't a Mac that you can buy for $500, but all that gets you on the PC side is a system with a horrid warranty, ads all over the desktop when it is booted, shoddy hardware, quick obsolescence, and no decent software bundle beyond the ads. Apple refuses to lower themselves to this level, and would rather let eMachines fill this supposed need of a cheap dumb terminal.