As I always say when these discussions come up, be careful about your assumptions. Some of your customers have also LONG since stopped going to movies because they're way, way, way too expensive. For that matter, to some people McDonalds is too expensive!while it's perfectly acceptable to spend $22 ($11 if alone) on a one and a half hour movie in a stuffy theater?
This is less true when you're dealing with the iphone and the XBLA, of course. It's a safe assumption that these people have some money to spend. However, particularly when it comes to casual games, there seem to be a large number of players who are disabled and/or unemployed. Especially right now, with the economy in turmoil!
That doesn't mean everyone should slash their prices to $.99, just that it's silly to immediately accuse EVERYONE of having hypocritical value judgments.
As for the rush to standard price points - it's the price you pay for relying on that particular system to promote your product. If the main thrust of your marketing is "hoping to be on the top seller list of iphone apps" you're going to have to put up with what it takes to get there.
There are many niche products in the gaming market that get away with charging well above 'average' prices, because what they offer is special and rare and not easily duplicated, AND they go to the trouble of cultivating a fanbase that will put up with the higher prices.