My old mtn bike commuter looks rough as hell and rides smooth as butter.
And I agree, you don't have to use the most expensive componentry. Smooth quality drivetrain, great tires, smooth, true wheels, comfy saddle, racks, and ergon grips are my must haves on my commuters. In the past, I always tried to stick to Deore LX or road equivalent. I also tend to put stickers all over the bike that I leave locked up downtown, at festivals, stores, pubs, etc......

I like finding old steel bikes for $200 or less and then dropping around $300 in overhaul and decking them out for commuter use. That being said, I usually have quite a bit of parts, lights, racks, sometimes tires, etc....accumulated in my spare parts bin to take on new projects or to refresh the bikes I currently maintain.