Probably right about most people not having a frame of reference for comparison.
But... say you wanted to cop a loose, rootsy dobro like sound, I wouldnt be reaching for my new Taylor (I dont have one anyway). A cheap old factory student model might be just the ticket. Maybe in this case the cheaper guitar is better for the application. Every guitar has a niche to fill.
However, having said this, I agree that a Martin or Larivee (insert other hand made guitar) play better, are intonated better, and have clearer tones than a low end Yamaha. For sure the 'law of diminishing returns' applies here. Exactly how much ($) better (in tone, playability) is a Martin to a Yamaha.
The 'Mojo' factor weighs heavily here as well. I dont care what anyone says, a Yamaha cannot compete with a Martin (Gibson) in the Mojo category. Some people will confuse this with quality of playability, tone, or workmanship.
Some really interesting guitars fall into the higher quality, lower cost category. I supose Gidge would argue that Yamaha fits here. I would mostly agree. Another in this category might be Seagull.
I think all these factors are why I love guitars so much! Each one has its own personality. Some will be your friend, some will rub you the wrong way!