Basically, you have to weigh your current food budget and plans vs the budget for the dining plan and how it would affect your ...well...dining plans. (And then the monkey wrench of the room discounts too!)
For instance, what are you receiving for that extra $400? If it's going to be close to what you're already planning, with a few additional meals that you aren't excited about thrown in, then it's certainly not worth it. If you'd be getting several more meals that you are excited about (or interested in), then it may be worth it.
As a couple examples (not really pertaining to free dining, but dining plans in general, they still illustrate this balance of cost vs experience).
My 2012 trip was on the DxDDP (Deluxe
Disney Dining Plan). For this trip, I had estimated that I'd be spending roughly $450 more using the plan than I would if I were to go OOP (out of pocket.) However, for that $450, I'd be getting roughly $700 in value and doing meals that I really wanted to do. In this situation, it was worth it for me to "invest" in the plan.
For 2013, my estimations are showing roughly $500 increased cost for DxDDP, however, due to different desires for this trip, I'd be getting roughly $505 worth of value for that $500, and that was after adding in a few meals and items that I was only picking up for the plan. In this case, it was better for me to go OOP and eliminate those excess meals/items that I wasn't really wanting in the first place, since the cost vs experience value was shifted the other way.
Now, for my estimations, I did do a lot of math (or rather, let Excel do a lot of math
) to figure it out. But in general, if you're looking to dine in that manner, and looking at the top half of the menus in the top third or so of the restaurants (price-wise), the chances are, it'll be a decent deal. However, if not, then you'll likely be better with the room discount. (Also, if staying Deluxe with 2 adults, you'll be better off with a room discount even if you purchase a dining plan!)