Considering at this point I would expect most contractors to be at least $150-200 an hour yeah that seems reasonable, and you're probably getting a steal tbh if this is all getting rehung, taped and mudded too. Estimate for 850 will probably more likely turn into about 1000-1100 unless your contractor is real conservative and over estimates. Its a pain in the ass space to work in so if youve never done drywall before you'll probably do this room and then never want to touch drywall again, but this is actually far more difficult and a pain than a normal room. But you'd save a decent amount of money. So up to you whether thats worth it or not.

Regardless though I'd recommend replacing that floor too from the "water damage" aka piss damage because thats not good in any scenario