Try to talk them down to $250 to cover the pedals and saddle but yeah it is a good price. If you bought a new bike you would be spending at least that much money and probably for not as nice of a bike.
Everybody rides different so it is really hard to say how you should look but your arms should be extended out in front of you rather than straight down, but you shouldn't have to reach or lock out your elbows. You should be comfortable.