It does sound like the dealer has diagnosed correctly. I have just had my poly Vee belt and tensioner replaced after a failure of a bearing in the tensioner and then the little shock absorber that anchors the tensioner to the engine block. Anyway, the belt would buck and upset all of the components running off it, notably the power steering pump.
However, the cost sounds way excessive. I was told this was a half hour job. Certainly, they did mine in the space of a morning. It was under warranty, so I can't tell you what the parts cost.
1999 SL 500
1993 320 TE
1986 500 SEC