Yes .. true,
Intel i7-2600 : $300
Intel i5-2500 : $200
That is around $100 difference when you buy them both BRAND NEW. Say you buy new i7 to be installed on your iMac, you already took the risk, spend $300 for processor.
Now you have to disassemble iMac yourself, or have Apple technician install it for you (if you want to keep the warranty), that is additional cost. Say you'd have to spend $50 for installation (get the tools yourself, or paying for labor fee)
For all that problem, you already spend $350, right?
Next step is selling your naked, pre-owned i5 processor from iMac. How much would you get from that bare-naked processor? No matter it's the newest i5, unused ... it's still pre-owned ... you may get around $150 for that. That if you can sell it to another end-user. Apple Store definitely won't take that, and local computer store may take it for even lower price.
So, in total you spent: $350 - $150 = $200 to upgrade your iMac to i7. Now, do you think it's still expensive?
All currency is in US$ .. and OP still not telling us, what kind of currency did he use?