Actually I have heard master tapes, and I believe analog to be just as good as digital...and vice-versa. I do own a turntable and frequently enjoy some classic records.
I can't stress enough that it isn't the digital format that's flawed, it's the corner cutting by manufacturers, IMO.

For every bad piece of digital gear, there's some horrible analog stuff out there too...as bad as a $60 cd player might sound, I'd be just as frightened of a $60 turntable. I try not to get involved in the digital vs. analog debate because I like both and I find it stupid. So much for that.

With regards to $200 vs $1200 CD players, I do find that the sound improvements are rather subtle, but the build quality, and features available improve substantially. This isn't a bad thing, after all, a CD player is a toy, have fun with it. Plus, desite my "anti-elitist" talk, I do have a certain sense of satisfaction in owning a nice Arcam player, guess I'm guilty too...