The world Courtney Love is from is the old world, where you needed a specialist to do all these different jobs. You needed to pay a producer, engineers, buy studio time (sometimes these are packaged but the more well known the pricier, and acts like Hole use well known outfits), this is what drives costs up. Not to mention marketting, distribution, etc.
In today's world a poor musician who wants to record and distribute his or her music can, and the best of them will be able to demand a price, or merchandise.
Also, a big part of recording is having a producer/engineer, who knows how to capture the essence of a performance in a recording. If you've watched American Idol's last season you could see how high profile musicians and producers zero in on strengths and weaknesses of a performance.
I think one thing the Love piece really pointed out is that there is a lot more to getting your music out there than recording. The distribution system is about to be solved but all the other problems, the really big problems, still exist.
The hardware, everything I mentioned and one or several mics (or a guitar amp), is still only about $3k to get started. SM58s (great for guitar cabs and ok for rock vocals) are used all over the place, they cost $99. An introductory condenser, like an SM81 (acoustic guitar, drum overheads, most acoustic instruments, some vocals), is about $300. If your voice is what you want to showcase, spend $1000 on a Nuemann TLM103 (my college roommate had one of these). $1000 is about the cost of a guitar amp and a guitar to get started.
This equipment will not make you rich, but it will give you access to the tools you need to learn the craft. I'm contrasting to a time (the 60s) when you needed half a million dollars just to put a sound on tape. Putting a sound on 'tape' these days doesn't even cost anything, the technology is everywhere.
Edit: To more specifically address your post, yes you're right, the talent is still the "hard part" of making music. My point was that if you have the talent, recording it is not as expensive as it once was.
That aside, the guy who recorded the "Owl City" records started out by releasing tracks from his parent's basement while working at Coca-Cola. Imogen Heap I think started off on home recording gear and recorded her entire first album herself. Also check out YouTube for Ronald Jenkies, that will give you an idea of what you can accomplish with a modern workstation, which will run you $3k new, decently equipped.
Edit: It has also occurred to me that if you're a band, and you can perform your music well (everything in 1 take), you can probably buy enough studio time to get a good sounding album for under $3k. I can't think of any specific music this applies to, but a great deal of grunge music in the 90s was recorded in this kind of a scenario.
Not the best sounding record but when you have no money, you do what you can.
Recorded as a favor from a studio owner. Sounds pretty decent, I think!
If it costs $500,000 to produce a record, like she says it does, that would create limited room for a great number of bands and artist to record. The market size ($s of world wide discretionary income) can only support a certain level of production.
Figuring out how to lowering that number would be far more productive than trying to create the next huge app which helps starving artists with terrible recording quality get their music heard or some other distribution method.
(She also fails to add in concert revenue which may be lucrative for artists)