My first thought when I saw the title of this post was, "probably!"
And with some people, it truly is just ignorance of what goes into making a quilt. My husband once asked me to make an Ole Miss themed baby quilt for a coworker. He followed the daily progress as I made it. When it was done, he said, "Wow, I never realized how much work went into one of those!" I've been married to this man for 25 years and making quilts for more than 10, he just never really paid that much attention.
Sometimes it's hard to tell if people are just trying to get something as cheaply as possible or if they really have no idea what they are asking. On the other hand, sometimes it's obvious.
And to answer your other question, was your quote too high? IMHO, absolutely not! The reason K-Mart and the like can sell them so cheap is because obviously the materials are not good quality, but mostly because the poor folks who make them are GROSSLY underpaid. This man is asking you for CUSTOM work. Custom is never cheap.