The thing with FPGAs is if they do something fast, and that thing becomes actually important, they are inevitably replaced with an ASIC. So they are mostly used in the small-medium business space where you need to do serious parallel processing (video or whatever), but don't have the market or budget for a full-on ASIC.
The price thing, as I understand it, is mostly a problem for small volumes. If you're using decent quantities Xilinx will happily cut you a deal for chips at a decent price :/
Also, I guess small FPGAs can feel a bit toy-like when up to a certain point you can just do things in SW.