I certainly believe that I can compete with other applications at top schools based on my essays, recommendations, work experience, education, and ECs, so sometimes I get excited about the prospect of getting admitted at a top school, but my excitement is usually short-lived when I see countless threads by "admission consultants," who say get a better score (700+). [I have a 660]
I think that the schools do encourage everyone to apply, but they definitely look at the GMAT score as a filter. That is the only common standard they have to compare 1000s of applications.
I would be very interested in knowing whether the adcoms read all the materials of all the applicants, or they read the material only when the GMAT score is higher than a threshold. Of course, all schools say that the application is looked upon holistically.
I think the best approach is to get the best score that you can, prepare your application packet as best you can, and apply to various schools, and then see what happens. I believe that if I am truly an outstanding candidate who is a good fit for that school, I will be accepted. But, I will know so only after I apply.
Bottom line, I don't think a low GMAT score should stop us from applying, but we should be realistic about our chances.