Pbowler:
Your financial analysis of the cost of making a batch of homebrew seems correct. I would suggest, as someone else has here, that you collect your new yeast from your first brew and use it again for about 3-4 times. That way you spread the cost of the smack pack over more batches of beer and your cost goes to $2.00 per batch or less. I collect the yeast and trub out of my primary fermentor(bucket) after each brew and store it in a frig until I need it. I collect it in a sanitized plastic container with a screw top lid. I store it in the frig with the lid on loosely for CO2 escape. When it comes time to use it, I add about a cup or so of sterile water (water boiled in a covered pan on the stove for 15 minutes and then cooled), swirl, let sit for about 2 minutes or so and pour the liguid off the settled trub into my sanitized jar I use to prepare a yeast starter. I then add sterile wort to the yeast and add an air lock and let sit for a day or so until I brew. You will find that reused yeast from such a starter begins fermenting in fresh wort much quicker than the original smack pack. This is because you are adding a much larger amount of yeast to the volume of wort, or in brewing terms, you have increased your pitching rate. I only use my yeast 3-4 times because 2 things begin happening when you reuse yeast. One is they change slowly by adapting to the environment or the beers they have been in as well as mutate (genetic adaptation). Second, along with your yeast, there are some bacteria along for the ride as we do not work under sterile conditions as home brewers. Thus, it is best if you buy new yeast after about 4 bactches to start fresh. I usually only want about 4 batches of a given style of beer and want to change yeast anyways.
One other comment, if you look at the time, effort and cost of producing and supplying liquid pure strain yeast, the $7.00 is actually a very fair price. If you decide to propagate your own yeast, you will need a large pressure cooker to sterilize things, test tubes, dry malt extract, agar, other lab glassware, etc, not counting your time. You will have to buy a lot of yeast to equal the cost of propagating your own. Price it out and see.
Just my 2 cents.
Dr Malt