Out of the 6 guitars I own, 5 were under £500. My Epi Les Paul was only £290, and has now been fitted with new pots, tuners, frets and Mules for less than a good friend of mine paid for a battered second hand (but still very nice playing) Gibson Les Paul Studio.
Personally, I wouldn't consider spending £1700 or more on a guitar unless it was being tailor made for me by a custom builder like Feline, Legra, Manson or my local luthier, SGL. Certainly I'd struggle to hand over four grand for a PRS I knew to have been built on a production line, no matter how well finished it was.
I think, for me personally, 'bang for the buck' is more important, at least up to a point. I've never been a brand-name person anyway. My first guitar was a Yamaha Pacifica 112, and I replaced it with a Pacifica 812, instead of a humbuckered Fender Strat because it was better vaule for money. I'm currently waiting for the bits for my Warmoth Soloist to arrive, and it doesn't get much better in the value for money stakes than that, especially when it's two $ to the £.
I'm not down on people who play expensive guitars by any means. There is, as Dave says, sometimes a discernable gap in quality between expensive instruments and their cheaper equivalents. But when one is £450, plays and sounds pretty good, and the other is £2500 and plays and sounds very good, the question I ask myself is 'Is this really two grand better?'.
