Of course it is too much.
For $500 US I can buy a german sheppard, which will last me 11-15 years, much longer than computer hardware. The dog will lick my face, be happy to see me every day, be anxious to play every day (without fear of overheating and artifacts), and will act as a chick magnet when you take it for a walk. And most importantly it will make you feel loved .... Now who was talking about a videocard, eh? And later on you can breed it for puppies that you can sell or keep for yourself, making it an even better investment. A dog can also protect you and will probably impress more people than a stupid videocard. But stop for a second and think, when is it that you spend $500 and you remember it? Possibly travel, well sure maybe not $500US maybe $700 but all those trips are memories for life. White water rafting, trips to mexico (cheap in the summer - all inclusive), downhill skiing at Whistler...etc. Now try to justify spending $500 on something that will be forgotten so fast you wouldnt even know it. Basically most people who wont justify spending that much on a piece of hardware wont justify it even if they started making millions. Others wont care. This question is impossible to answer. It is like asking someone if it is worth spending more money on a brand name product vs. a no-name (clothes, food, etc.), or if it's worth buying a car?
I think, a person is satisfied with the price he/she paid at a point when the amount of money paid for a product/service is equal to or less than what he/she intended to pay as a maximum in the first place. And that value is different for everyone.
For me $500 is a lot, because videocards become obsolete in 1 year, making the depreciation cost tremendous. Besides, you can get A64 3200+ ($200), good motherboard ($100), and 1gig of ram ($200) that will smoke the P4 EE at gaming and office apps. So you also do get the processor, the PCB, and 1 gig of RAM. (so this argument is invalid) Think about it though, for $500 US you can build a whole workable computer, but a $500 videocard alone is useless.
This is really not a question you can dispute because for someone who cares about gaming A LOT, $500 is not a lot on a videocard, and others will call you crazy. So to each his own. Also a videocard's performance doesnt "last" as long as the cpus, and often you end up replacing the videocard a lot more often than your cpu, making that investment even worse. But hey, you only live once, so if you start thinking about what you need and what you want, then really, 99% of the stuff you have isnt what you need.