Getting back to the original questions: Is there too much stuff and is it too expensive?
This thread has drifted off into a wealth of industry issues, which I find fascinating, but let me interject a pure consumer viewpoint for a minute here.
I do not understand people complaining that there is too much for them to buy, or that they are being forced to buy new books.
One of the big reasons I started playing D&D is that DMing was a creative outlet. I could play with as little or as much pre-prepared material as I want to. When I started playing, I was using one saddle-stitched, b&w booklet of rules with a spot-color cover ('77 basic set). After finishing the module that came with the set, I made up everything else for the next year. The only thing I spent money on was graph paper. I don't know how good it was, but it was mine. And my friends and I had fun. ("And I walked up hill in the snow in cardboard shoes... Damn kids today!"

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This is still true today. Nobody NEEDS any of this source material. Consequently, nobody NEEDS to go buy a whole new set of rulebooks every time there's a new edition published. All you need is a rules set that you and a few friends agree on. Who cares what the rest of the world is playing?
I'm not trying to sound ridiculously minimalist here, just putting things in perspective.
Of course, the truth is that soon after I started playing I wanted to read other people's ideas. In '79/'80, my local shop was filled with amateur mimeographed junk, and I bought a lot of it. A lot of it was the same; a lot of it was crap; and I'm sure a lot of what I didn't buy sat on the shelf until the day the store went up in flames.
The difference between then and now is that I didn't have ENworld, or a thousand other websites and messageboards, reviewing everything everybody put out. I'm in a MUCH better position today to make qualified buying decisions than I was 25 years ago. These days the internet has become my local shop. It's where I go to talk about games, see what's new, hear what others are doing, get product opinions from around the world, and buy stuff.
Yes, there is a LOT out there right now, but I've got the tools to weed through it, and I think those tools are generally doing a pretty good job of bringing the the cream to the top.
Does it cost too much? I don't know. Personally, I don't need everything I buy to be in full-color, hardcover, with lots of ultra-professional art. This is a game of the imagination; if your descriptions are good, my mind's eye can fill in the imagery. (I'm sure that sounds old-fashioned and makes the marketing guys role their eyes.)
Anway, prices will also always be expensive as long as you're setting up traditional presses for relatively small runs. No way around that.
My price point is based on how much use I'll really get out of it, but right now $40 pushes my limit for any one thing. And I don't buy much.
I think this hobby is in better shape today than it has been in a long, long time.
Roleplaying experienced a rebirth with d20, and now it's going through another maturing phase. As long as good, new ideas are out there, there can't be "too much stuff". The stuff that isn't good, or truly new, will get sifted out of the mix.
For you guys in the industry, that does mean that the pressure is on, and things will continue to change. But cheap media like PDFs, and low-overhead internet sales will continue to give little guys with good ideas a fighting chance.
zog