How are you defining that the older model is a 'better' Mac Mini at the same price? What does the $799 older Mac Mini do/have that a new Mac Mini (up to 4GB of RAM for $799) doesn't have?
If you bump up the RAM on the new Mac mini to price it the same as the previous gen at $799, the older Mac mini only has 133mhz CPU increase (which isn't a big deal), but the newer model gains an HDMI Port, an SD Card Slot, easier accessibility for upgrades, and most importantly an upgraded GPU. Additionally, the newer model also receives a revised case, loses the power brick, and has less power consumption then the older model.
Again, I think most people, myself included, would gladly give up 133mhz in CPU clock speed for the additional features of the newer model. I believe the the newer model, when upped to 4GB of memory, is superior to the older model at the same price point, especially in an HTPC application.