I have had good luck going low (~$150) and haven't really had to upgrade more often. Picked up a 1950gt earlier in the year for around $125, expect it to last two years, but if it lasts more, that is gravy. I like having less resistance when I do want to upgrade. The fact is that I can play on these cards for years (still use a 9700 in one machine). There is definitely diminishing returns on video card performance.
Depending on the game, I do have to turn off a good bit of eye candy for the 9700, not so much for the 1950.