Macrojack, from my perspective you are the one who seems not to be able to get it. The law of diminishing returns is simple; we get it.
What you don't seem to see is that you have set the point of diminishing returns painfully low, and others disagree, and you have no way to demonstrate that we are wrong. Your opinion on where the law of diminishing returns kicks in is not absolute; somehow you seem to think it is. It is nothing other than your opinion, "...beyond a given point in your refinement trajectory you will pass a point beyond which further improvements come at an ever increasing cost ... that the reward will not be commensurate with the outlay." I have been trying to tell you that you are declaring what cannot be proven.
Jmcgrogan2 gets it, as he points out the same thing, that you are appealing to an absolute which does not exist.
Jmcgrogan2, I find your logic strained. Now that you left the $125K rig you state that the incremental gains didn't exist because you built a rig that's 90% as good? I would suggest you were doing things wrong then, when it came to your high priced rig, because at that point - at any point - one should not settle for a 2%, 5% or even 10% gain/improvement, but more like a perceptual 25% or 50% improvement. It is not worth a lot of money, if I were to state what I consider diminishing returns from a perspective of performance, to gain only a perceived 2% or 5% improvement, so if you were spending big dollars and content with that, I suggest you were vastly overspending to improve your rig. As a consequence, I can see why you think diminishing returns sets in quickly. However, I think it had more to do with your methodology of system building than anything else.
Simply building a lower cost rig that beat the prior higher priced one assembled does not demonstrate that generally lower cost rigs come oh, so close to higher priced ones. If you now nullify your previous impressions/conclusions about the $125K rig you had, distrusting them, how are we supposed to put confidence in your declaration that the lower end rig is so much better? Maybe if you went back to a $125K rig you would change your mind again!
But, you are correct in concluding, "since the return (musical satisfaction) cannot be quantified, whether it is diminishing or not cannot be measured."