The competitive reasons for setting up in Ireland will never be about low wages. It currently is about low tax and access to European market expertise/localisation/legals etc.
So how do high-tax high wage places like New York or San Fran do it? It’s mostly down to the cluster effect. Previous companies invest in the infrastructure and training of talent and the talent often doesn’t move. VC’s come after the fact (I don’t believe they come first). The system is a feed back loop strengthening itself on each success and even exploding companies scatter talent in diverse ways around the surrounding area.
It takes a lot of luck, talent and enthusiasm to kick start the process – and it gets harder as other hubs improve their situations in a global world. Catalysts are good universities and guilds, government tax breaks (btw I’d argue that too much government investment leads to incompetency and weak output) and local community networking. Oh and games jams help too – http://www.theshindig.org
The EA Galway support thing is good thing – but it tends to happen fairly orthogonally to the creation of games studios or the training of people for games studios. But it does make games a more palatable subject in the eyes of the press and it does keep investors looking this way.
I did an article for indievision about 6 months back talking about the business environment for setting up a small indie studio in Ireland and the pros/cons. It’s sort of relevant to this discussion: http://www.indievision.org/?p=1069