where I disagree with that theory is that manufacturers ARE trying to say their high end tv are better. ppl ARE trying to outdo their friends with the biggest, or thinnest, or smartest, or whatever the marketing is convincing them is the best at the moment.
99% of my friends believe whole-heartedly that a thin LED tv is the best, most advanced display technology ever created. the thought of paying the same amount for a plasma sounds ridiculous to them.
there may be a 'gap' in the market, where nobody is looking to spend ~6k for a tv. they either need it to be under 4k, or they are full on baller, and they're going spend the 100k for a 120" special order beast. but I don't believe this has anything to do with ppl accepting mediocrity. customers are still trying to buy the best they can afford, there's just too much information(marketing) leading them in the wrong direction.
and let's be honest, ppl want things cheaper, not crappier. there's a lot of low end TV's being sold because ppl are putting TV's in a lot of weird places. I have a tv in the bathroom. when purchasing I had two conditions to meet. it needed to be small enough to fit between studs and inside the wall, and it needed to be cheap enough that if I decided it was a dumb idea, I wasn't going to regret it forever. I also bought two of the cheapest 32" lcds on the market several years ago. yet, when I went shopping for the tv in my theatre room, the list consisted of zt60, vt60, f8500. NOTHING less than that would be considered. if I was going to compromise due to budget, it would be on size, not quality.
so I would argue, there is a demand and a desire for GOOD displays at home. what's lacking is an understanding of the technology. marketing has pushed most ppl into believe led is the pinnacle of picture quality, and ppl are actually spending large amounts of money on buying them. I know a lot of ppl that would rather spend 3grand on an LED than 2grand on an st60. to me that does not line up AT ALL with the theory that ppl just want cheap displays
Displays: Samsung PN64F8500/JVC X35
AVR: Pioneer VSX-1130K, 7.1/5.1.2 audio
Sources: HTPC(Enby), PS3, XBOX360, Wii
Control: Harmony One