Even so, you still have to buy the rest of the components, and you're still looking at $60-80 upgrades once a year under that plan. I took the other route, and stuck by a Celeron 300A with a TNT2 for 5 years. For the last 2 and a half, there were more upgrade concerns than just the video card, and by the fourth, the entire $1000 system was pretty much a write-off. Mileage-wise, it was only marginally cheaper than just buying some consoles, and I could have had much, much better graphics over the time period.
There are many valid reasons to go with a PC for gaming instead of a console, but for those on a limited budget, who enjoy the kinds of games that come out on consoles, and who won't have a conniption switching from 1280x1024 down to 800x600, I would say that the console is the cheaper way to get a gaming fix, no question.