Kevin,
I completely agree with you about the dining plan insulating people from the true cost of the meals.
We used the dining plan last summer. The actual bill for a sub-par LeCellier meal was outrageous. In fact, the service was so poor that had we not been on the plan, I would have walked out. I believe Disney has purposely raised the out of pocket prices to outrageous levels so as to move people into the dining plans. Once locked into the plan, you are a captive diner. The high out of pocket cost gives the illusion of value to the DP. And an illusion is exactly what it is, as you correctly pointed out you are ultimately paying for it.
I have determined the DP just isn't worth it at any price.