I used to belong to the crowd of "the developers should have lower end machines so that they will make the game perform better on crappy machines."
That's all well and good, but we spend a lot more time actually working on the game as opposed to testing, and particularly during crunch time, you don't want your machine to be chugging.
Game Devs should (and sometimes do) have top of the line systems to use. The systems really pay for themselves in the time-saved department, thinking in the long-term.
I myself, have:
Q6600 G0 - 3ghz oc - $300
8800gtx - $500
8gb ddr2 800 ram - $180
2x500gb hdds (no raid) - $100
vista 64-bit ultimate - Free
antec 900 (keeps it all cool) - $80
antec 650w psu - $60
22" Acer LCD - $180
and i'm gonna get a new rig within 6 months, consisting of:
2 x 4ghz Xenon Quad (Skull Trail)
2 x 9800gx2 [Quad SLI] (or 2x280gtx if i'm lucky)
16gb ddr3 1333
300gb VelociRaptor 1000rpm (OS install)
2 x 1tb hdds (no raid)
vista 64-bit ultimate and server 08 dual boot
thermaltake armor+ lcs
Dual 24" LCDs
*note, both of these builds are budget builds, costing less than $2000 at time of purchase (gaming rig 1 cost $1700 a year ago (after tax, and other minor things); gaming rig 2 is estimated to cost around $1800 at time of purchase)*
and if i can have all that, i'm sure game companies can afford systems like that.