I believe the truth is in the middle - for a gaming/home machine with1920x1200 resolution, Dual Core is still fine (3.0Ghz Core2Duo or 3.5+Ghz AMD equivalent).
Outlining a budget PC Gaming rig, I would still recommend saving money and getting a highly overclockable Core2Duo for ~$70, and spending the most on the Graphics Card.
Having said that...
"Name a twitch FPS substantially better than UT/UT2004"
- QuakeLive / WarSaw - trick question, twitch-FPS genre is a highly conservative eSport, with games designed for maximum visibility and minimum hardware requirements.
"Name a story-based one better than HL/HL2"
- HL2 with the High-Rez Textures Mod (consoles wouldn't handle it even if that was availiable)
- STALKER Complete 2009 (2012) - one of the best examples of how much a mod can improve a game in every way.
Name a FPS/RPG better than Deus Ex or System Shock 2.
- Mass Effect 1 & 2, best played on the PC due to mouse-aim, faster loading, more complete patches, and the ability to skip bad gameplay elements (hex editing to avoid the resource grind).
- Fallout 3 Wanderer's Edition + Mart's Mutant Mod
- You should have listed System Shock 1, it is superior to the sequel.
- Mount and Blade
"Team substantially better than Counter-strike: Source."
- Team Fortress 2
- GuildWars GvG (circa Prophesies/Factions, World Championships)
- Bloodline Champions
- Monday Night Combat (just released into Beta on Steam) Mouse + Keyboard > Controller, in this case.
- Battlefield Bad Company 2
"Name a RPG better than Baldur's Gate 2."
- BG2 was a well written adventure, but in my opinion it's high rating is based on the genre's overall mediocrity.
- Neverwinter Nights series was a close equivalent.
- I would have listed Darklands because it captured the spirit of playing a role much better then more modern "RPG"s.
"MMORPG better than WoW."
- MMORPG's are generally mediocre, but I would list Ultima Online or EVE instead. Yet another trick question as lagging behind on hardware requirements is one key component of any MMORPG success.
"Dungeon crawler better than Diablo 2."
- Diablo 3 when it's released
- Torchlight
"Multiplayer RTS better than Starcraft"
- WC3 was trash, and this is yet another trick question / setup because RTS is a 2D genre, and whether something is better or worse has little to do with graphics.
- Starcraft 2 is amazing because it approaches the greatness of the original while being much more accessible in terms of APM and learning tools.
"Single player RTS better than Homeworld."
- Starcraft 2's Terran Campaign, and Homeworld isn't even a good example when you could have listed Shogun: Total War.
- Total War Realism Mods - improved and more fun versions of every release are availiable and being developed, PC Mod exclusive.
"Turn-based better than Heroes of Might and Magic III, XCOM UFO Defense, or Master of Orion 2."
- Sins of a Solar Empire, Galactic Civilizations, and why is this even mentioned, 4x games are very rarely hardware intensive.
"Name anything that compares to Myst."
- Baudolino by Umberto Eco (you said "anything").
"So tell me again what I need a quad-core for?"
- Home Workstation for 3D Rendering, CAD, Video Editing, Super-High Resolution Gaming w/ Multi-Display Surround, and possibly for better Game Recording performance.
"The only reason to play a new game is because the old games have been played out, not because the new games are better. It's placeholder entertainment, not riveting entertainment."
Generalization based on what I suspect is limited experience, in addition to the general difference of opinion.
"You can get placeholders from consoles." - and you can get superior versions on the PC, playing with the Mouse+Keyboard, Joystick or Controller, with better patches and mods. Mods often turn bad games into great ones - Fallout 3 is a great example - I didn't bother with the game before Fallout Wanderer's Edition 6.0 was released, including all the DLC's. I'm probably going to wait for the New Vegas equivalent.
In the Golden Age of PC gaming CPU/GPU upgrades meant something. Being 1 year behind would kill you. Now a 4 year old dual-core and Geforce 8800 derivative will cover 99.9% of what's worth playing.
I agree about the CPU, but your GPU will mean using 4-year old resolutions and graphic settings in many cases. I upgraded from a 8800GTS to a Radeon 4850 and then to an 460 GTX OC and have seen significant image quality / performance gains in each case, increasing my resolution to 1920x1200 on a 24" Monitor.
I think the Golden Age of PC gaming continues because the upgrade rush was both a blessing and a curse - as we reach the photo-realism plateau in graphics, developers can finally start focusing on more important aspects like innovations in gameplay (ex: destructible environments). The lower hardware prices for such quality is a very good thing for PC Gaming.
Congratulations.