$500 isn't crazy at all,assuming they are going to do the job *properly* and make a little money in the process. That will mean cutting out the rust and the immediately surrounding metal, and welding in a new piece, seam sealing the weld correctly and then painting the area.

How long do you realistically want to keep the car? I don't know what the state is of the rest of the car, but unless it's pristine and you plan to keep it another decade... I would take a grinder to that rust, use one of the "rust killers" products out there on the area, then lay in fiberglass cloth over the hole. Or you could possibly use some mesh and cover the hole with JB Weld, or use JB Metal (the stick) to plug it.

Purists won't like my answer but for that small area, I would probably go the cheaper route.