Also keep in mind that the $800 million amount is for developing the Falcon I, Falcon 9 ($390 million total) and the Dragon spacecraft (about $400 million). Even had NASA used more commercial oriented procurement methods they estimate it still would have cost at least $1.7 billion to develop.
Cut NASA down to size and you're just getting more missiles and warships. You're not getting a tax break or the sudden birth of 100 SpaceX's. SpaceX should be applauded for its innovation and drive, not considered the low hanging fruit of space and everyone suddenly saying "This stuff is so easy why isn't NASA using their methods?!?" Because its not easy.
[1] http://www.nasa.gov/pdf/586023main_8-3-11_NAFCOM.pdf
Edit: NASA originally came up with the $4B/$1.7B estimates that InclinedPlane mentioned. They visited SpaceX, saw how they actually operated, and revised the estimated downward.
I'm not sure that's really fair for NASA to do. The question they were supposed to be answering was "how much would this cost NASA to do?". They can't just see a more efficient operation and then cheat their numbers down because without Space-X, NASA would never have had a reference to work off of. NASA doing it the NASA way would have been the larger figure, not NASA doing it the Space-X way.
And where would Space-X be without the Saturn V...
On the space shuttle, every outer tile is unique and must be manufactured accordingly. Boeing cover their rockets in shitty orange foam.
When the shuttle returns, it is driven into this spider-like contraption that actually cost almost as much to build as a shuttle. Boeing put the rocket on its side, and use step-ladders, and, I kid you not, a plank.
Hint: Fighter jets cost a lot more because parts have to made in many Congressional districts.
I ask because as someone who was previously unfamiliar with the amount of funding SpaceX had to work with, $800 million sounds like an incredibly small amount of money to do (what looks like) more than NASA does with its ~$18 billion budget.