Well I wouldn't say it's dumb, but I think the 2.53 version might be the sweet spot. The step up from the base model gets you a slightly better processor, but more importantly, twice the disk space and RAM. I doubt you'd notice the difference in speed between the 2.53 and the 2.66 unless you were running benchmarks.
Yes it's crazy. I have a 1.8GHz mini with 2GB RAM and it handles everything except for full 1080p .mkv files (which any mini will struggle with anyway). I watch hulu, netflix on demand, quicktime files, 720p mkv, eyetv, etc... I don't think it's necessary to spend an extra $200 for an upgraded mini media server.