They are overpriced right now, but thats only because stock is low (they don't have that many of them left and Fermi is getting ready to come out) and the demand is still high. High demand + low supply = HIGH prices. Thats what it comes down to.
There are too many people people who think Nvidia is the be-all-end-all of graphics. Even though ATI has them totally beat right now (who knows when Fermi comes out), there are still lots of people who either don't know any better and go with the one they recognize more, or prefer nvidia and stick to them.
Its just like those who buy low end Intel CPUs, even though they are beat by cheaper AMD CPUs, just because they have the Intel name stamped on them (granted Intel leads at the top, but the comparison is still there)
From a sensible standpoint sure it doesn't make sense, but I spent quite a bit more on my 260 back about a year ago, so even at it's current price point, it's dropped quite a bit in price, and given the high demand for the card(whatever the reason) a $200 price point on it's own, when not faced with a 4870 and it's current price, to me seems like a substantial price drop for the age, and price it used to be.