Sounds like a fair deal. The 800 may be a basic bike, but being professionally assembled and maintained means a lot, plus even its most basic parts are as good or better than the best parts on the Schwinn that walmart is selling right now.
You've already seen what is below the 800, but you might also consider what is above, as well. The 820 is nearly identical except for the RST Capa suspension fork. The 4100 has an aluminum frame and the 4300 has the aluminum frame and I believe better components. I'm not sure about the prices on these bikes, but the bike shop owner would be glad to enlighten you.
As for fit, you should have 2-3 inches of clearance over the top tube when standing flat footed and it should feel comfortable to pedal. 17" sounds about right, but that should be based on your decision.
Welcome to the sport
