You are wrong. If ExpressHD can build and sell at a profit this kind of PC for $1,400, due to economies of scale, Apple could sell one for say $1,600-1,800 and make a killing. Enough to pay for all the software development/hardware integration.
There is plenty of evidence of Apple's greed and stupidity in its history. Choosing to offer a very narrow product line is stupid in my opinion. Apple could offer non-Xeon lower end towers for the bulk of such market.
Again, when not enough Mac Pros sell, Apple will rationalize it by saying that market is dying. Delusional greed is what they are affected with.
I think you hit the nail on the proverbial head. I think at least part of the faulty thinking they have is due to having no real competition for the hardware end of things. Yeah, if you want to compare Windows to OS X there is a comparison, but that's clearly NOT an Apples to Apples comparison (pun intended). If you want a "Mac" you're SOL. It's either an Apple or hack city. Psystar meant to at least do the work for you, but you see how Apple is treating that. Instead of competing, they want to sue to protect their monopoly. Instead of most Mac people recognizing how bad it is for them in terms of choice and quality, they'd rather defend Apple's right to overcharge everyone.
I can only figure this is do to the fact that most people tend to not think about their situation, but imagine they'd do the same if they were in Apple's position (most people ARE greedy, sad to say). But in terms of Capitalism (which isn't my favorite thing as it breeds greed generally speaking), competition is good period and Apple has none unless you include consideration of changing operating systems. If you have thousands of dollars of software invested, you aren't likely to do that and Apple knows it. Whereas they take advantage of the opposite situation. They now make it EASY for a PC user (who is more likely than not to have NOT purchased his software, statistically speaking regardless) because they "allow" (big of them eh) you to put Windows on their machine so you do not have to give up your Windows software. Of course, if they allowed virtualization of OS X in Windows, the same could be true there as well. They are very one-sided in this issue and of course it's because it benefits them (greed) to do so. By fair and open trade standards, it's not 'fair' at all, of course, but people justify it because Macs are a small overall market share of operating systems even though they are a rather large share of overall hardware sales from a single vendor. Most Mac users refuse to see this, though because they are blinded by their own greed (they'd do it too if they could get away with it) and they tell themselves that Apple "owns" their OS so they can put any restrictions on it they want, even if that means invading your personal privacy and thus your 4th Amendment guaranteed Constitutional rights.