I would have jumped at $70 for that bike in that condition. I don't think you got burned. Most of the 3-speeds I pick up are in MUCH worse condition although I usually pay about $40-50 for them. That bike has a ton of potential. I bet it could be made to look pretty darn nice with just a clean-up. No paint is necessary I bet.

Post pics when you can of what it looks like when it more done. If you were near Chicago and I had seen this thread earlier I'd have jumped at the $20 offer -I'd even have given you $70 for it.