Given all the complication that your quote is in US$ and I don't know what that is in English money and the engine has to go back and forth across the Atlantic, etc, etc, I wouldn't have a clue about what is "reasonable" in such circumstances. I'd just be delighted that there is a firm that can do the job.
What I do know is that Villiers Services are up there with the best for doing such work. Where else do you go for getting new spares for a 70 odd year old engine. Plus they will do the primary transmission, clutch, gearbox, kick starter and so on. You will get back a totally renovated power unit ready to drop in and ride away.
I have a number of ancient Villiers powered bikes. Some younger, most older than yours. Not once have Villiers Services not been able to supply me with the parts I've requested from them. Sometimes they've been amazingly fast and sometimes they've driven me nutty but not once, ever, have they not eventually come up with what I wanted. So, a quirky firm to deal with but one that has always in the end done exactly what they said they would.
Cheers,