nVidia does much the same as ATi in this respect.
The GF2 MX was a heavily cut down revision of the GF2 GTS.
For ATi they've done the same in the Radeon 8500 > Radeon 9000 transition.
It's a cheap low cost budget product, saves ATi money to manufacture and offers reasonable performance for the average person.
The GF4 Ti4200 is an underclocked Ti4600.
For ATi the Radeon8500LE is just an underclocked Radeon8500, the Radeon 9700 will be an undereclocked Radeon 9700 Pro.
It covers the mainstream, and offers performance close to top of the line without paying the hefty price premium and allow ATi/nVidia to sell of parts that arent up to spec for the 'high end'.
It's simply not realistic to push a card as complex as the GF4 core into the budget segment immediately after release, let alone the sub-$50 market segment. Consumers would be happy, but the stockholders wouldnt appreciate the plummeting profits, and heavy losses seen on the low-end.
I'm sure we would all love it if ATi released a heavily inderclocked R300 at $100.
It would provide awesome performance while leaving an appreciable margin between it and the R9700 Pro.
It would also cut away a dramatic number of sales of the R9700, and ensure that it will take ATi a VERY VERY long time to re-coup the R&D costs that went into the creation of the R300.
The low end is likely always going to be more then simply an underclocked high end product. The mainstream will generally be that underclocked hig end product, except just after release of a new generation in which the mainstream will be stuck as last generation's high end.