I believe that Fawcett published Nickel Comics in the early 1940s. As far as I know, that was the only title ever to sell for a nickel.

The digest market is tricky. DC used to be in it. Marvel even gave it a stab. Both got out of it.
Archie comics have an advantage. The simplicity of their linework means that the comics survive reduction a lot better than the typical superhero work. (Take a look at the Spider-Man Digest and you'll see what I mean.) I suspect that they also forego any reprint royalties, making production of the material cheaper. In addition, they put out enough digests each month to justify paying for those by-the-register slots at the supermarket.
(And if Pat starts trying to explain how Archie reformats their work for the digests, don't believe him. He tried that once on Usenet, trotting out some false assumptions and treating them as fact.)
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And hey, speaking of Pat vs. facts: I checked out a few mags on the newsstand today. Saw Marie Claire at 240 pages for $2.95. Seventeen was the same length for four cents more. The May issue of The Source was $2.99 for 208 pages, as Jay had noted.

Stopped by another newsstand. In the under-$3 range, I saw a number of magazines with over 175 pages, including Teen People, Parents, Mademoiselle, The Source (this was the june one, with 232 pages), and at the top of the list, with 264 pages, the April issue of Self.