Well I've worked my way up through the ranks if you like, and justified my D300 on several factors (not that I needed to justify it at all really). I do believe that whilst you can take great photos with any kit (from a pinhole upwards), there are advantages of some kit over others, depending on your type of photography.
If you find yourself constantly disappointed with the results from your camera despite doing the best that you can with it (or can be done with it), or you find yourself regularly missing/not taking shots because of the cameras limitations, then it's either time to upgrade or accept these limitations. I decided to upgrade for some of teh reasons below (Olympus E-1 to Nikon D300):
1) Low light ability - focusing is far superior in low light to any of my previous cameras
2) High ISO ability - ok, maybe not superior to ISO 800 film (although I have yet to test this), but far superior than that from the E-1
3) Larger viewfinder - not a selling point on it's own, but something I was looking for over the E-1
4) Faster focusing - my old Minolta was just plain lazy! The E-1 was pretty good, but the D300 is amazing.
5) Image size - I'm afraid that the E-1 didn't meet my needs for the future.
I truely believe that the low light/ISO/focusing improvements will improve my photography by allowing me to take photos that I have previously had to pass on or be disappointed with the results.
But that's just for me and my photography. I'm sure that Jonathan has his reasons, and that everyone else has their own. My girlfriend is still using a 3 MP Pentax Optio and is very happy with it as all she needs is to document loactions for her reports. The Pentax does this fine as her pics never exceed 6x4" (usually smaller). In fact I'm looking out for a new battery for it so we can continue to use it.