I agree with the "bite for bark" statement. At 165bhp, the legacy is decent for it's weight (HP to weight ratio is comparable to Accords and Civics), but when you start comparing it to the upscale euros, it starts to pale to the power that they provide.
So what are they going to do, let's look at it this way: If they decide to market to the Audi/BMW crowd, they are going to lose face, IMHO, because that crowd *expects* more than what the Legacy provides for the price, on the other hand, if they decide to market to the Accord crowd, they will do good because they provide so much more (AWD, etc).
Just my ¥2
Stripped White '93 Accord
(no hood, no trunk, no quarter pannels, no bumper/grill/lights, no front doors, no airbag, no ignition)