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Well, I think your scenario for application development seems unconventional, or at least outside the realm of most development scenarios.

Virtualization is pretty common, and getting more so every day. People are starting to look at their space lease and electric bills.

And you could still go buy a dual slot, quad core handling setup from newegg, throw Ubuntu on it (or OSX86) and have it be cheaper.

The retail cost of the equipment in a Mac Pro tends to be more than the cost of a whole Mac Pro. Apple must get some good volume deals. The Mac's 1600 MHz chips aren't on the retail market yet, but the slower 1333 version of the 2.8 would cost me about $1,500 for two. Looking at the price difference on the last bus bump, add maybe $300 to that. Now I get a mobo ($500) and power supply ($300) and I'm within $200 of the Mac Pro's price. Hope I can find the case (quality aluminum, quiet please), heat sinks/fans (gonna need good ones), video, memory (FB-DIMM), keyboard/mouse (must be decent) and hard drive really cheap.

Virtualization is pretty common, and getting more so every day. People are starting to look at their space lease and electric bills.

Virtualization is common. Developing applications where were you need to run that many VMs with that kind of load so that they need dedicated cores, is not. I really have no idea where this comment came from; no one was implying that virtualization isn't common. As I already said I use VMWare for development. I find the exact scenario you're describing to be out of the ordinary. I certainly don't think it's sufficient to describe the 8 cores as the Second Coming to software development.

You're right, the current Mac Pro incarnation is cheaper. I suppose my perception of the hardware being expensive is tainted by how it was even just a couple of years ago.