I am as guilty of believing in this fallacy as anyone else. And sometimes you do bump up against a genuine limitation imposed by your equipment. For example, if you are photographing action in dim light you may find your camera body does not provide high enough clean ISO and your 3.5 to 5.6 zoom lens is too slow. Consequently, your photos are blurred and you just cannot freeze the action. In such a case you have bumped up against a legitimate limitation which can be alleviated by purchasing a D3s body and a 2.8 zoom lens.
But how often do we think we cannot make good images because our camera body is "outdated" because it only has 10 megapixels (like the 2008 D80 which was replaced by the D90 and that was replaced by the D7000 making a D80 now three generations "outdated" and a D90 one generation "outdated") instead of the current 16 megapixels in the D7000 and D5100? We forget that every photo displayed in NR is displayed at less than 1 megapixel. We forget that even a 55 inch HDTV will only be able to display about 2 megapixels.
How often do we think we cannot make good images because our lens is a "cheap plastic" 3.5-5.6 zoom rather than a "professional" 2.8 zoom costing 10 times more money?
I have a D7000 (no FX bodies yet) and professional glass but recently purchased "outdated" used D40 and D70 bodies from e-bay just to see what those old low megapixel bodies could do with a "cheap plastic" lens. I displayed the results on my 55 inch HDTV and compared those images to images shot with my D7000 using "professional" glass. Guess what? There was not much difference. I should have realized that before I started because in both images I was looking at the 55 inch HDTV downgrading them to about 2 megapixels anyway.
Here is one of my test photos with the cheap plastic 18-55 lens on the outdated D40 body.
Nikon D40, 18-55 lens at 55, f/5.6, 1/30 sec., ISO 220, -0.7 exposure compensation to deepen the colors (the D40 sensor tends to let colors wash out so I usually shoot it at -0.3 or -0.7 exposure compensation)
Here is a image shot with the outdated D90 body and the new "cheap plastic" $280 40mm DX macro lens. This is a rusted hinge on an old barn. Apparently it had once been painted red and had been painted white before that. The few spots of green and yellow may be lichen growth rather than old paint since it is so few.
Nikon D90, 40mm DX macro, f/8, 1/400th sec., ISO 200
I conclude that the weak link is me, not my equipment. While I love the new "professional" level equipment I must admit my skill does not exceed the old outdated bodies and cheap plastic lenses.
So what to do?
I suggest trying to have more vision before I take an image.
Just what am I seeing and tying to create in this photo?
How do I manipulate the camera to capture the image I am trying to create?
If the image in my brain is not really very good, the photograph won't be very good either.
So I don't need new equipment as much as I need a better vision in my head before I press the shutter and a better ability to manipulate the setting of my current equipment to produce what I imagine in my head.
Here is an example. Wilson Tsio. I have been to many of these towns he photographed many times. But I have never seen them as this guy did. His vision, not his equipment, makes his images. The images he gets with the old equipment he uses is shocking to me.
Here is a slideshow of images taken with a point and shoot.
Here is another slideshow of images taken with a Nikon D70
These images taken with that equipment make me very humble.