I think the point of diminishing returns is a floating target that lies somewhere around the point where you can no longer justify the additional expense to yourself.
10 years ago I would've told you that a hotrodded Epi Les Paul was where it's at. It played and sounded great, and after upgrades it still cost less than a low end Gibson.
5 years ago I would've told you that a good USA Gibson Les Paul is where it's at. The guitar just felt and sounded different. The carve of the top, the feel of the neck, the tuners... the devil is in the details and the best pickups in the world won't turn an Epi into a Gibson.
For the last few years I've been playing a custom shop Les Paul. I wanted a P90 Les Paul and at the time the '54 and '56 re-issues were the only option. I wouldn't have been able to get it if it weren't for '56 RIs being a bit cheaper than Gibson's humbucker equipped Historics (and I got it at a bit of a discount due to my friend working at the store). It pretty much ruined me for cheaper guitars. The devil is in the details and everything from the feel of the tuners to the fretwork to the stoptail was above what I was accustomed to handing. It would've cost me a fortune to rework a USA Standard up to this quality, at which point the USA Standard would've cost more than what I paid for the Historic.
Last year I bought a second custom shop Les Paul ('59 re-issue) to replace my old USA Standard. It blows it away in every regard. Sound, feel, looks. At this stage of the game I would have a hard time justifying spending $3000 on a USA Standard when I know what I'd be missing out on for slightly more money (I'd get a 57 RI).
That said, I periodically play my old Epi and it's still a damn good guitar. Just because a guitar doesn't cost a small fortune doesn't mean it isn't a good guitar, just don't try to convince me that the difference between a $500 guitar and a $5000 guitar can be made up with a pickup swap.