GoT's budget is colossal: $60 million for Season 1. That makes it $6 million per episode (compared to $5 million per episode for LOST, $4m per ep for HEROES or $2m per ep for BATTLESTAR GALACTICA). When you consider they got the use of the Paint Hall Studio for free, they inherited some sets from the movie YOUR HIGHNESS (the Arryn throne room is the main castle set from that movie), a budget-boost from Northern Ireland's film commission, and generous tax breaks, their actual money-on-screen ratio is extremely high.
In fact, I think it is fair to say that perhaps we should be seeing more spectacular things on-screen than we are. However, whilst some of their overheads are dirt cheap, others are extreme. Sean Bean is apparently VERY expensive (I'm not sure how expensive, but if you said half a million per episode minimum I would not be surprised, and it could be considerably more) and the cast is massive. This is the biggest speaking cast for any debut season of a HBO project ever, more than BOARDWALK EMPIRE, and I think overall only the huge cast of THE WIRE towards its end had GoT beat. All those actors cost money. Then there's the new sets they've built, and the considerable cost of shuttling the production from Northern Ireland to Malta and back. So it adds up.
One thing that should be better next year, and I expect will effect the direwolves directly is that the CGI team is being upped from 6 for Season 1 (not including the credits, which were done by an outside contractor) to over 30 for Season 2. And I believe the plan is go fully CGI for the direwolves in Season 2. Using the real animals just hasn't worked out for them the way they hoped.