Thanks Patrick... I'm going to respond to the offer tomorrow and give myself some time to think tonight... They mentioned istockphoto.com and I think this is where they are coming up with the number.
You could use any image from iStock at $1 and up for this project. Now, if they don't want something from there and absolutely want yours, you can ask what you want. You'll have to figure out where the balance of 'we really want it' vs 'not at that price' is.