You've pretty much hit the nail on the head as to how I see it. The sweet spot for me is around 400 - 600 bucks - anything more than that then it's less about technical sound quality, and more about personal preference.
If you go back to 2005, before Dre & Iovine worked out they could sell blinged out 30 buck headphones for over 10 times that amount, you'd be hard pressed to find much in the way of headphones above $500 - the Sennheiser Orpheus being a notable exception. The top dogs at the time, AKG K7 series (701 at the time), Beyerdynamic DT880 and the Sennheiser HD650, are all still in production, are all still under $500, are still highly rated, and still have a massive following.
Of course when the established and upcoming headphone manufacturers observed that Beats were able to sell utter rubbish at criminal prices to fashionistas, and in process pretty much steal 50% of headphone market practically overnight, then everybody and their dogs wanted a piece of that pie. And there began the price hyperinflation of headphones.
For me I'm totally happy with my DT1990 and Mojo combination, and I see absolutely no need, and have absolutely no desire to buy into anything more expensive - I've heard the LCD 4, Utopia, and HD800S through a DAVE, and I'm not convinced that they are significantly better than what I already have. Different yes, but better - no not really, not to my ears.