If you only take the hardware into account, sure, it's overpriced compared to others.
But a lot of products are.
Same for Apple: You can get Android smartphones with the same or better hardware for half the price.
So it's overpriced from that point of view.
If you include the design, the software, the possibilities, etc., then it's probably not.
There's still no other device combining a Linux PC and a gaming device - that's a unique feature you don't find anywhere else.
The N900 is not even in production anymore, so you only get used devices.
Also, as any phone, it's optimized for phone usage. Any emulator I tried stuttered, etc.
I had a stuttering NES emulator on my N900 and playing fullspeed PSX on the Pandora.
You also still need separate controllers, something some people don't want (like myself, for example).
Whether that justifies the price is up to you.
However, there's a lot more behind it.
Compared to the N900, the Pandora has the better keyboard and a standard PC Desktop. Something I (and probably others) love about it. It also has a STANDARD Desktop and not that Hildon-Thing.
I won't compare it to Android devices, as Android is a mobile system and for me it's missing stuff like ClawsMail, etc.
I've got K9-Mail on my Android phone, but I haven't been in the mood yet to setup all my eMail accounts (about 10), including signatures, etc. on it.
With the Pandora, all I did was copying the Claws-Mail directory from my PC onto the SD-Card and I had all my eMail accounts setup.
This might all be of non-interest for you personally, but for some people, it adds a lot to the value.
Also, it's made by a few guys, not a huge company.
Take a look at the N900:
Nokia scrapped Linux because it wasn't commercially as successful as they would've liked to.
I'm part of the Pandora team, and I would never scrap Linux as I love OpenSource and communities working together.
I'm not primarily interested in profit.
There's even more behind it:
With buying the Pandora, you not only support a small company, but also their idea of OpenSource mobile devices, of their idea to produce as much as possible with proper wages, etc.
In Germany, there's something similar, called "Fair Trade" products.
You can buy Fair Trade coffee for 3-4 times the price of normal coffee - but with Fair-Trade products, you make sure that the poor people who harvest the coffee get fair wages.
I drink a lot of coffee, but I only buy Fair Trade one.
So yes, the pure hardware is overpriced.
But there's so much more behind it, adding value to the device.
Whether it's still overpriced is up to you. But if there would be Fair Trade-Phones for twice the price than a comparable normal one, I would for sure buy the Fair Trade one.