It's not, seriously. I have a pretty basic 32" S-Series Sony Bravia TV, and it's only 60Hz. Works just fine for fast and furious games. I have an old LCD monitor from around 2001-2002 with a 16ms response rate, and I used that for gaming for a number of years with no problems.
What you tend to find, are a lot of people who have to have the latest and greatest thing, and in an effort to justify the huge premium they pay for this privilege, they tend to overstate the gains. It's the same overcompensation issue you see with kids who have to have a fast and/or loud flashy car, or jacking it up like 5ft off the ground with monster truck like wheels. It's just a manifestation of overcompensation for masculine insecurity. It does NOT accurately reflect the experience 99% of the rest of us will have.
Now, there is one thing to consider here, in that TVs and computer monitors are going to be very different beasts, and you didn't really specify which one you were talking about. For 30" and above LCD computer monitors, you generally need what's known as a "dual link" capable video card. Basically the monitor will require two outputs on the video card to drive the display. If you're talking a 32" LCD TV, then don't worry about it. You're also very unlikely to find a 32" LCD monitor for under $600.
I will offer one suggestion, in that if you're going to go 32" or higher with a TV, make sure it's 1080p. The Xbox 360 and PlayStation 3 are both capable of 1080p output, and that will do a lot more to make the image look better than 120Hz refresh rates and 8ms or lower response rates.
Other than 1080p, just stick to some of the major brand names. If you stick to Sony, Samsung, or LG it should make it pretty hard for you to go too wrong.
I'm looking for a 32" LCD for my teanage son who will play action video games. I don't want the action to be blurry. I've read that 8 ms response time & 120hz are important factors. I'm looking to spend no more than $600. Can you recommend specific models? Do I need to increase my budget? I appreciate your advice.

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