There's several factors I'd consider with lengths of games.
One as you point out is what you're looking for and how much time you have to spend gaming. When I was younger, I'd buy games on consoles which would be replayable, and didn't tend to have a story line. Games like Smash Brothers, Mario Kart, and so on. I played the hell out of them, so I consider that money well spent.
When I was in college and even the early university days I played Americas Army
mainly. For those who haven't heard of it, it's a free first person shooter which you play online with mates. There's a large diversity of maps, and a competitive scene, so I had a lot of time and got fairly into it, probably averaging 1:30 a day for a while. I'd happily have paid a lot of money for that too.
Now that I have less time, I buy games which have a shorter storyline or play time, and don't tend to involve myself in games which will take a long time to master or complete. The example you cite is a little on the low side though, an hour's gameplay is probably pegging it a little low, even for $5. I'd probably say 2 hours for that - with a little replay value to pick up in a week, month or year - would be about right.