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I'm not real familiar with all the technical aspects of a quality bike versus a cheapo one BUT...
My in-laws bought me a cheapo from K-mart. It rides fine and gets me where I need to go. I ride it fairly often to just get places in town instead of driving the car. Hubby's bike is the one that we put the connections onto in order to hook up the bike trailer for the little kids.
Hubby has a very nice bike that he paid a couple hundred for from a bike shop. He has even taken it back after an accident and they checked things over and made some minor repairs and tune-ups at no charge. Because they warrentied it. That was a big benefit.
What I can definately tell you is that even those my bike is newer, has the same number of gears, and is similar in size... I can ride his bike longer and harder without getting tired. I can ride his bike up a particularly long and steap hill on the edge of town, with the trailer hooked up and full of 2 kids but I cannot make it up that same hill without stopping and walking my bike. I do not know all the particulars but the more expensive bike has a smoother ride, easier to ride, more comfortable seat, and better gearing (or whatever it is that lets me make more power without straining so hard).
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"Always learn the rules so that you can break them properly." Dalai Lama
My Karma just ran over your Dogma. 
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