Yup inflation sucks.
A $1000 bike in 1990 was a relatively a better bike. However, the real question is if its better than a $670 bike in 1990.
IMHO, in the low end bike makes ave the priorities all wrong. They go for low weight and put as flashy as possible parts where the consumer notices and skimp elsewhere. One example is gimmicky wheelset which look like very high-end wheelsets (which are overrated anyhow) but skip on quality. Disc brakes are another new gimmick on cheap bikes (Not in the sense that they don't work, but they are often placed to cover up cheap parts). The key is finding a bike that doesn't do this as much.
Also, trek has declined in hardtails. Trek made some awesome steel hardtails while, the ALU trek bikes are realivly more lifeless and boring. ANd they don't save much weight if any. People just thought ALU>Cro-mo.