Of course they're a viable form of transportation -- or those hispanics (odd that that's the thing that defines them) wouldn't be commuting to work on them. If somebody is a bike commuter simply because they can't afford a car, then the odds are good that they don't know much about bike maintenance or have the right tools (the hobbyists are more likely to know about that), and so if the bikes broke as often people seem to claim they do, they wouldn't be able to afford to keep paying people to fix them.

Also consider that Walmart sells quite a few different bikes -- different brands, different models, etc. Some are likely to be of better quality than others.

Personally, I've bought a few Wal-Mart bikes of various types over the years and I've found the quality to be acceptable. Most recently, my wife wanted a mountain bike, we got her a $80 one from there. It was remarkably well put together -- no complaints about the quality at all. It needed a few adjustments here and there, but nothing difficult. My biggest complaint about it was that the suspension let the distance between the pedals and your seat vary, which was just weird to me (but I mostly ride road bikes with no suspension, so perhaps that's normal?) and my wife liked it -- until she realized that my road bike was 10 lbs lighter (20 lbs vs. 30 lbs) and then she insisted on something lighter, even though weight only matters under certain circumstances.

As for if we're wasting our money buying better bikes, well, maybe. They say you get what you pay for, and there's some truth to that, but it's not a linear scale. $100 can get you a good bike, $400 gets you a bike that's better -- but certainly not 4x better. And a $1000 bike certainly isn't 10x better ...

Personally, I'm a fan of getting a good bike used. Of course, that tends to work best when you know something about bikes and can spot a good deal, and can fix things that you find wrong with the bike you bought ...