Usually but it depends on a few variables and it's not always worth it.
Because you're not used to it, high end equipment doesn't sound amazing in comparison at first - just oddly different. (At least not in a $400 to $100 comparison - the biggest difference is going from $10 to $100.) Once you're acclimatized, though, it's really hard to go back until your hearing naturally degrades and you're stuck buying high end gear.
So the rational approach is to never buy high end headphones or earphones at all and instead aim for the highest quality stuff under around $150. It'll get you 90% of the way there and stop you becoming an audio freak chasing an expensive pipedream. Almost no-one will give this advice, though, since audiophiles want to rationalize their purchases and reviewers or stores want you to buy their crap.
Definitely agree with going from $10 to $100. I bought a pair of Grado SR60 headphones a few years ago for ~$65, and they were by far the best headphones I have ever owned. I heard things on CDs that I never noticed before.
Strong agree on the performance curve for earbuds too. If you can buy it at Best Buy for under $100, your money is probably better spent with something nicer online.
In high-end speakers (hi-fi, whatever you want to call it) there are always sleeper brands that even the audiophiles will say offer an 80% experience for under 50% of the price... I remember (before several buyouts) NHT bookcase speakers being one of those. It's probably the same in headphones.
Please, for the love of God, take my word for this: it's also very much true of cars.
Grado SR60/SR80 are extremely cheaply built, mine had plastic pieces come off and one of the ear pieces sometimes snaps off from the head band. Really unacceptable. On top of that low frequency response is less than ideal. Old similarly priced Panasonics that I use as heavily are still in one piece and work reliably.
I'm using Sennheisers now, I'm not sure how it's going to hold on in long term, but for now it seems that they have higher build quality than Grados.
There's no gospel. Get what you think sounds nice.(1)
Go to a real hifi shop, where they actually demo the stuff for you in living room-like conditions (carpet, not warehouse ceiling etc., and no 25 TVs blaring MTV across the aisle), and listen to the difference between, say, $80 speakers and $500 ones, then try to figure out where your ability to hear the difference levels off, and get something in that range.
Bring a CD of the kind of music you enjoy. "Thunderstruck" is wonderful for demoing bass, but if you're into indie-fragile-weeping-dude, it's not what you want to base your purchase decision on.
If a place won't let your switch between different speaker/amp combinations on your time using your own music, you're not buying from them.
(1: Except one thing: cables. Don't get the biodynamic green tea infused ripoff stuff, but the ones that come with your stereo (even good ones) are most likely absolutely hideous. If you already have a setup, and use bad cables, spending a bit of money on decent cables is the best investment you can do.)
The only thing to look for in digital cables is build quality, so that the cables last, don't break, and you get your money's worth. I've got these quality ethernet cables I bought 15 years ago that I still use. They don't have to be expensive either. Pretty much anything you get from monoprice.com fits the bill.
I was referring to analog cables.. but yeah, if you're buying new, getting an end-to-end digital setup is entirely feasible. Still, you probably want a single minijack-to-phono for plugging in an iPod.
Because you're not used to it, high end equipment doesn't sound amazing in comparison at first - just oddly different. (At least not in a $400 to $100 comparison - the biggest difference is going from $10 to $100.) Once you're acclimatized, though, it's really hard to go back until your hearing naturally degrades and you're stuck buying high end gear.
So the rational approach is to never buy high end headphones or earphones at all and instead aim for the highest quality stuff under around $150. It'll get you 90% of the way there and stop you becoming an audio freak chasing an expensive pipedream. Almost no-one will give this advice, though, since audiophiles want to rationalize their purchases and reviewers or stores want you to buy their crap.