Upgrading bicycles seldom makes economic sense. An $80.00 powder coat job, a few new components, new cables and housings and maybe a little labor will take you a long way toward the price of a brand new bike with probably a nicer frame, all brand new components and a new bike warranty.
What you can never buy is the satisfaction of riding a bike that you envisioned in your own mind and made happen. To guys like me, that enjoyment is well worth the price difference.
The bike shop isn't necessarily a jerk. He's actually right from his limited point of view but he's incapable of seeing things with the artistic half of his brain. There are lots of people who are like that.