It's a good game and probably the best Batman game ever done. However, I do believe it is overrated.
As a Batman game, having a 3D character dressed with the famous cowl and cape isn't enough to make it true to the Dark Knight. And this regard, the game fails. Anyone who has read a lot of Batman comics knows there is something important missing; the narration. Bruce Wayne is a troubled man in constant conflict with his role as a hero. He's always questioning his actions and make reflections about the current events. It might be a lot to ask to a video game, but I believe it feasible. Also, the environments are lacking some life and look too static. I would assume a jailbreak in such prison should be a lot creepier.
As a game, everything in Arkham Asylum feels to stiff. Controlling Batman is like controlling a tank (he's a martial art master) and the camera (which is too close to Batman in my opinion) could have been a lot smoother. The fighting is grandiose the first few times, but become quickly repetitive.
Oh, and please don't get me wrong. This is just for argument sake. I loved Batman Arkham Asylum and I'm really surprised by how good the game turned out to be. It does a lot of things right like the stealth mechanics and the overall audio design. The characters and setting design are also incredible. But in terms of overall value, I preferred games like Uncharted 2, Assassin's Creed II and Infamous.
Finally, I know I will break the whole purpose of a debate, but bottom line it all depends on your appreciation of the game. If you think the game was worth you 60$, then no, the game wasn't overrated to you. On my side, I think other games were more worthy of that same amount of money.