IMO, bah humbug on all the whining developers.
It's simply the nature of the beast. Is it really the App Store driving the prices down or that consumers just like cheap stuff. I always go with human psychology first and yes, consumers just like cheap stuff, especially of the digital variety where they like it free. Basically everything about our interaction with handhelds reinforces our feelings that things on it should be cheap.
It is physically small and therefore should be cheaper. And it is! It's $200 (or was $400 and $600). You don't see a MacBook for $500 do you? You don't see an iMac for $500? Heck, generally the bigger the device, the more expensive it is. Workstations are huge desktops and they aint cheap. Mainframes are essentially cabinet size machines and they are even more expensive. Hell, a supercomputer fills a room and let me tell you, you have to have some real dough to be able to afford it, staff it, maintain the hardware, maintain the software, manage the users, and be able to use it. And the users are perfectly fine forking over, say 10 cents per CPU-HR, lots of money for it. That sounds cheap, but most solutions who need supercomputing power require hundreds of thousands of CPU-HRs. 10 cents added hundreds of thousands of time adds up. And you don't even want to know the cost of licensing HPC software(it's a yearly fee on the order of tens to hundreds of thousands).
Going back the opposite direction to handhelds size, what makes developers think that their apps are worth $5, $10 or $20 to a potential buyer? The buyer will perceive any kind of software for a little device as little software and therefore should cost little money. It really doesn't matter how much effort was put into the app, value is entirely about the perception of the service provided. Handheld software by sheer human nature will be perceived as something that should be inexpensive.
If you want to know what it is like the other way around, where handheld apps typically cost 2x to 10x that of App Store apps, merely browse around handango.com:
1. Spb Mobile Shell for WM: $29.95. Err, $30 for an application launcher/home screen for WM?
2. Checkers for WM: $14.95. I would have to actually pay money for checkers?
3. Aces Texas Hold EM for $14.99. Yeah sure.
4. SplashPhoto for WM: $29.95. $30 for a photo app like the one that came with the iPhone?
5. VirtualRadio for Nokia S60: $20.50. Um, it's radio. I get that for free.
6. SmartMovie (Symbian): $27.99. Player for the phone and PC software that converts video so it can be played on the player.
7. GOLF - IntelliGolf Birdie edition for S60: $59.95. Lots of golf courses
8. eBook Mobile V2 for Nokia S60 3rd Edition: $20. Yes, just the reader.
9. OmniGSoft - 3D Mini-Dogfight (Air Combat) for WM: $19.95. Looks 3D
10. IM+ All-in-One Messenger for Windows Mobile: $39.95. The usual IM suspects
Now, consumers, you tell me if you would buy at these prices? Look at the screenshots. What value is perceived? The thing that also needs mentioning is that outside of the App Store, mobile applications development is dead or dying, with developers trying to find cheaper means to get products to market. I'm sure there are many and varied reasons for it being so.
Developers are living in a dreamworld if you think users will pay more for handheld software. The only legitimate complaint I see is the nature of the storefront in both the App Store and iTunes is limited and only top 100 apps or so can be viably looked at. Perhaps a better filtering/search/smart system could be used to make more apps discoverable like the genius thing for music, but the cheap apps are always going to be popular.
If people just want "quality" apps system instead of the free-for-all, well, I'm sure that can been done too with Apple doing an iPod like model. Don't complain about it being closed though.