I thought it was pretty expensive at the point where I got it in the game, then it became useless afterwards because I only had 2 rupees. I used it maybe like twice in the cave of ordeals in the fight with the darknuts. Otherwise I got it just for the sake of having it.
If it were required to beat the game, I would be the first to agree that it's a rip-off.
However, being that it's an optional item, I have a hard time agreeing with you.
It does take a lot of effort to get. Perhaps more than it's worth. But that's your choice. Personally, I didn't get it.
I can see how it would be useful, though. There aren't a whole lot of uses for rupees in TP, and a whole lot of ways to get them. So, suppose you're near the end of the game, you've gotten everything you need, and you have a wallet full of rupees. What are you going to do with them? Well, you could use the Magic Armor, of course! You could use it in the following situations:
1. Beat a later boss that's been driving you crazy.
2. Conserve your health and potions for an upcoming battle.
3. Save yourself from death when you've got half a heart left, you're out of items, you've got plenty of rupees, and an enemy is coming straight for you!
4. The Cave of Ordeals. I've heard that a lot of people use it to finish that cave, and I think that's the main purpose of it. An optional item to help with an optional challenge.
I do not think Magic Armor is worth using, but I think it is worth getting for the brag rights. Also, it is spelled "Armor" and it is in Castle Town, not Clock Town. Clock Town is only in Majora's Mask.