I'm doing fine with my PC, although it IS running a bit behind now - not the least because the hard drive is on life support and failing. (Nearly 90% of the error correction sectors are used and it sometimes has trouble opening files.).
And I bought it back in 2006, and even then it was a fairly cheap machine (1500$ range) with components selected more for low noise levels than max performance. The screen was state of the art at the time, it's still decent enough (Samsung 226BW) but I'm thinking bigger. 
I think another part of the explanation for the lack of noticeable performance increase is Microsoft. One thing is consoles - I don't quite buy that, though - but the other is Dx 10 and 11. 10 in particular required that you got Vista in order to use the Dx 10 support of then new graphic cards... and gamers didn't. XP stayed the baseline OS, meaning the new bells and whistles on graphic cards didn't get used.
Another factor is LCD screens - CRT's could, at the time of their sudden demise, show better resolutions than even today's best LCD screens. The norm seems to be 1080p (1920*1080)
The latest Steam survey - which should show gamer trends mostly - shows Win XP still has a strong user base, but the share is dropping rapidly in favor of Win 7 64 bit - last january it was over 50%, now it's down to 25%. Which brings me to the subject: With the OS restrictions no longer creating an artificial lull in sellable graphic performance, I would expect interesting developments ahead.
One example is CCP's Carbon framework, which includes some impressive real-time environment, cloth, hair interactions. It is just a tech demo, but still... promising things to come. 
http://www.youtube.com/watch?v=Gf26ZhHz6uM