Depends on where you live. I was in NY and that wouldn't have gone very far. Try out a few projects, and you can change it later as you feel more comfortable charging more. Figuring out what you're worth is pretty hard when you're starting out because it's easy to approach pricing based on what you would pay for the service your offering, than what the reasonable market price is, or even what $ value your client is getting out of what you're building them.
Also charging more for successive jobs wasn't a joke. You're being pretty transparent about your pricing; you could keep going and post how much each project cost and what the thing was that you built for that. Might make a more lasting marketing ploy.
Yes, it's too little. Remember patio11's advice: you are not charging what the work or time is worth it TO YOU, you are charging what your output is worth it TO YOUR CUSTOMER :)
Also, having a starting price in the 10k+ range will help weed out bad apple customers. Trust us when we say that you want fewer high quality customers than a lot of pain-in-the-neck customers. Finally, charge 1/4th upfront like another poster said so you don't get screwed.
Having a starting price in the $10k range also weeds him out. In my market (Austin), if I have $10k for a prototype (even half that) I can throw a cat and hit a Ruby guy, a Python guy, a PHP guy, etc. The price as he has it is low enough that people with "an idea" might take the plunge to get a prototype going.
If I were to have one suggestion it would be for his site to spell out some parameters about what a prototype is so there are no later arguments.
I respect your desire to stick to your word. However, this shouldn't restrict your pricing over the coming weeks and months. Your time is limited, so if demand is strong your price should increase to better fit the market. You could always make an update later on that includes a note that clients may reserve at the current listed price but it could change over time.
Yes. if you're living near the poverty line "by choice", having money isn't a problem you're trying to avoid, it's spending it. The two aren't related.
If your goal here is to build customers, portfolio and reputation, do as others have suggested - feature a rolling price. It'll get you want you want, and set you in a better light.
In either case, I guess it would turn off half the visitors if I just changed the price right now.