As others have said, it is possible to make excellent beers with extract, indeed it is probably a good deal easier to do well with extract than with all grain, if your procedures is good. Sanitation, pitch rate, and temperature control count for a lot more than whether you are using extract or mashing your own malt.
However, there are some limits to the control you can have over the process with extract. In extract brewing, you have to work with the mashing practices of the manufacturers of the ME, which generally are going to be be as generic as possible. The mineral content, the mash body, the color depth, etc. will be entirely standardized, rather than designed for the specific beer you are brewing. So, with extract brewing there are limits to the amount of control you have over the process. This was a more serious issue in the past, when ingredients were often sub-par compared to today, but it is always going to be a factor in extract brewing.
Also, while the equipment cost for AG is greater than for extract - only a little more for BIAB, but there's still some added cost - the cost per batch is less because the price of malt is anywhere from half to a third of that of the equivalent in malt extract, and drops further if you buy your base malts in bulk. This does have to be balanced by the tendency to push your equipment purchases further once you start in with all-grain - after all, you want to do as much to improve your beer as possible, and it is harder to rationalize shortcuts when you are going to more work on a batch - though in many cases, the additional investments (larger BK, water filter, wort chiller, temperature-controlled fermentation chamber, better cleaning and sanitizing solutions, stir plate and Erlenmeyer flasks for yeast starters, kegerator and kegs, conical fermenters, etc.) would be just as much of a benefit in extract brewing if not more so.
Pretty much the only expenses that apply to mashing but not extract are the lauter tun/mash bag, water treatment, and a grain mill. Water treatment chemicals are quite cheap - at most you need only a few grams in any batch. Perhaps $20 in chemical salts will be enough to make 100 batches or more. While a malt mill may cost anywhere from $20 to $500, they can last for years - and this is one area where paying a little more is definitely worth the trouble. A two-roller mill costing $200 is a sound investment for an AG brewer. As for the lauter tun, well, that's a choice - a mash bag is cheap, but a cooler or kettle with a false bottom will last longer.
Finally, there is the opportunity cost. Even with BIAB, all-grain brewing takes more time and more effort. Only you can decide if that is worth it to you.
Having gotten into AG fairly quickly myself, I would say that you would be better off focusing on improving your general processes first. I would recommend starting with some books - the more you know ahead of time, the better off you will be. Next comes brewing software - BeerSmith is only $28 and cheap at twice the price, while many other options are free. Get those before your next batch. Similarly, a wort chiller is not optional equipment if you are serious about brewing - I suggest getting a plate chiller if you can afford it, though an immersion chiller is more than adequate. Make sure you have quality sanitation chemicals - I personally recommend PBW for cleaning and StarSan for sanitizing, though you'll want to mix things up from time to time to avoid any resistant strains. If you don't already have a brewing kettle capable of full boils, get one; even if you don't end up using it in your AG brewing later, a 5 gallon or larger boiler is worth having now. The next thing I would do is improve your fermentation temperature control; a used refrigerator and a thermostat is not that expensive, though space may be a consideration. Finally, I would get a stir plate and flasks and learn how to prepare a yeast starter to get a pitch rate suited for the batch size and gravity your brewing. Only once you have all those in place, and have worked out the kinks in your extract setup, should you start looking towards all-grain. Trust me, you'll want all of those things once you start in on AG anyway, so it's better to have them nailed down first, and in any case, they will do more for the quality of your beer than jumping to AG prematurely will.
