Twice as expensive? Cheaper than $700 is not twice as expensive as $500.

Sure, it'd be nice if it were $500 or less, but from what I understand, it isn't possible (I'd love to be proven wrong). PS is able to sell hardware at a loss to then recoup that loss in game sales. The Steam Machine is a PC. You don't have to buy anything from Steam to use it after you buy it. It cannot be sold at a loss - though I wouldn't be surprised to see Steam Machine packaged with games during sales to make it a better value for the same cost or something.

Moving from fact to opinion, I think the steam machine, for under $700, could be considered a better value than a PS or Xbox, for two reasons. The first is Steam Sales - you'll probably save a couple hundred bucks as compared to buying the same games on a console. Secondly, and more importantly, it's not only a gaming console for your living room, but also a PC for your living room as, when combined with the Steam Controller, I can't think of a better way to use a full desktop on my TV. The SteamDeck track pads make it totally practical to use a normal desktop without a mouse and keyboard. They're amazing for mousing, scrolling, and typing. I'll probably buy it for that alone - though the lack of support for DRM protected media might force me to continue using my Xbox as a media console - though I might also tell media platforms where to shove their DRM, becuase it obviously isn't working if I can acquire their media from other sources.

Tl;dr: it will likely be more expensive, as it can't be sold at a loss or tight margins - but cheaper games and the fact that it's a full fledged PC for your TV could make the additional cost make sense.