Engine builders...this machining cost sound excessive?

Building a motor is not cheap. There's no way you cleaned that block as good as he can.
Do you even own a set of bottle brushes? Do you think the cam bearings are ok? Why not spend that little bit of money to make them correct? Painting it is a good idea. And paint it again after assembly. If before final assembly you clean it correctly ( i.e. Dawn blue dish soap ) it will start rusting before your eyes as you blow it off. Have some WD40 ready. when it is finished and going down the street you will feel great knowing you did it.