The Java software, SUMP, already exists. You can check it out here (Jack has a better version at his site but I don't have a link handy):
http://www.sump.org/projects/analyzer/client/Price is currently the limiting factor, yes. The goal of the design is to be 'disruptive' - 2x to 3x times faster than Saleae Logic-like USB devices at 1/3-1/4 of the price. We're discarding a just about anything from the first version that requires a lot of additional software or hardware development (external SRAM), or raises the price (multiple banks of buffered I/O pins). We're going for a very basic, but very usable logic analyzer at an introductory price level. Obviously the Saleae style is better if you want infinite samples, but many (myself included) don't see that as a requirement for a useful logic analyzer.
If you want something more serious, check out Jack's Butterfly boards and wings at the Gadget Factory. They're already available, work with SUMP, but also serve as a generic FPGA development board. You can add up to 32 buffered inputs/outputs.