If you don't like them, or can't afford them, don't buy them. They were just as popular when I was a kid as they are now. A few girls at my school had them, and they weren't from rich families. Each was given one for Christmas, and then each year for their Birthday or Christmas presents they got outfits or accessories.
My parents never got me one. I survived. I was actually quite used to being told, "No, sorry, but we can't afford that." I don't have any emotional scars from it.
Let your daughter choose to spend her money as she likes, as long as you are teaching her to save first before spending.
If it weren't American Girls dolls, there'd be something else - a Wii, xBox, Nintendo DS, etc. There will always be expensive items on the market. It is our jobs as parents to help our children determine the value of those goods and to help them make choices that are in line with their goals. It's hardly evil or unethical to have expensive dolls that hold up wonderfully year after year, as long as the child is a good owner.
ETA: I don't let my kids pressure me into buying them ANYTHING. My 5 yr old constantly tries to tell me, "Mom, we need to buy this yogurt, because we will win a TRIP if we get it." I then explain to him about advertising, marketing, etc., and how the job of the people who made that commercial is to get people to buy the item, but just because a commercial says it is good doesn't mean it is, and even if it IS good, it doesn't mean that we NEED it.
ETA2: Yes, the magazines were addressed to ME when I was a kid too. I still never got one of the dolls. It didn't affect my self-worth. In my family, fitting in was never been held up as something to aspire to. For all my parents' flaws, they did a GREAT job with that!