Why is it flawed? Yes, you already have those things, but there's a cost involved with all of them. If you look for the absolute best bang for the buck, then it probably doesn't make sense to spend more than $100 on a video card. I haven't seen any deals on a $200 video card that produces double the frame rates of the 460 1GB that was $100 a week or two ago.
My point was akin to spending $1,000 instead of $500 on set of tires for a Corvette. The $1,000 tires might not have double the performance of the $500 tires. However, spending $51,000 compared to $50,500 is a very negligible cost difference for the entire car. Yes, you already own the car, but that doesn't mean that you should buy a $500 set of tires because they perform 70% as well as the tires that cost twice as much.
In the same way, you shouldn't put a $1,000 set of tires on your Geo Metro or a $300 video card in a $300 computer.
I think that looking at the entire system cost for price/performance is valid for those reasons.