I think they classify it as a B2 level repair. I just got my 70-200 back from warranty repair, AF was NG, they repaired that, the VR, adjusted everything and made a mod to elec component all under a B2. This was under warranty, but Melville's B2 repairs usually run $279 plus tax and shipping.
Warren give KEH in Atlanta a call, They should be able to give you a more reasonable repair cost then Nikon.
My personal dealings so far with Keh has been limited to buying and selling. They also do a lot of out of warranty repair work and the feedback that I have heard is positive.
It shouldn't be that much. I had mine (17-35) repaired for a little over $300. You can actually call Nikon and they will give you an idea. There is an ex nikon repair facility (http://www.authorizedphoto.com/), and they were a little cheaper.
I spoke to KEH and was told cost to buy new motor is $200 and labour $110. Depending on the lens that might be reasonable. They will only give a 6 month warranty after the repairs and turn around time is 2 weeks.