I disagree. Now, I haven't released any games on the store, but I've released three different applications. On one of our apps, we raised the price to $6.99 from $0.99 since it was a niche product. We now are selling 1/2 as many as we were before, but the 7x increase in price more than makes up for the difference.
The key phrase you have is "as long as the product is good." The problem is that the App Store itself is no longer a viable marketing channel, since there is so much competition. You have to be in the top 50 of a category to get any traction. The indie devs are having difficulty getting noticed in all the clutter, and a "few hundred downloads" is about on par with what I am expecting for each app we release.
Maybe eventually we will release an app that catches fire, but I'm holding expectations at the few hundred mark for now.