assuming the guy has a legitimate shop and has to pay insurance, rent, etc... the price is not too bad, but neither is the job to replace it yourself--
if you've got access to a decent supply of tools and a couple good jacks and stands, it's a matter of pulling the trans and popping out the seal. If you've never pulled one, I'd give yourself the weenend to do it, but really, it's more like a 4-5hr job (shorter if you've got a access to a lift and a trans. jack)
--Shorty
P.S. I agree that it's the front pump /torque converter seal