I have had 2 american girl dolls- Felicity & Kit... sonewhere they are packed away.
I LOVED them, heck I still love them! They are nice dolls... wonderfully made, and so fun to play with and enjoy! For me they were my favorite dolls, and got much more use than other dolls. I knew they were special, and so I kept them nice.
I also read all of the American girl books... they were a great tool in getting me "into" reading. I don't know if the dolls would have been so special to me without the books.
Was is worth the money? Hmm... well I would buy my daughter one when she is school age, especially if she fell in love with one of the book characters. I think the justification is that you give your daughter a few high quality toys, vs. a lot of crappy toys... Like buying high quality wooden blocks or cheap getting plastic ones, I myself would get the nicer ones, but if I did, i would not be getting other things for her as well. If you get an AG doll, make an agreement that you won't buy any more dolls for her for quite a while, and instead you'll get accessories (even if they are target or ebay ones), or books that go with that doll.
As far as the argument that she doesn't "DO" anything.... well I did more with my $100 doll than I ever would have with expensive romote control cars, train sets, video game systems, etc... that some of my peers had. Plus, when I was playing with felicity I was using my imagination and creativity, and I did all sorts of stuff- I learned to sew clothing, I learned to knit, and I read, and read, and read. I guess the doll didn't "make me" do those things, but it helped to have a really special doll to sew for, knit for, and learn about... These dolls are made special by the books, and by learning about "who" they are.
Sure another doll might work the same way- and are they overpriced, I guess... but no more overpriced than a toy that does "a lot" but ends up at the bottom of a toybox.
-M.