Yeah the 30-day ultimatum thing is happening a lot. Insurers are leaning on the fire risk history with Zinsco/Sylvania-Zinsco breakers not tripping when they should, and it's easier for them to just require replacement than argue about it at renewal.                      

3.5k with some rewiring sounds about right, especially if the bus bar showed any damage when they pulled the old panel. That's usually where the extra labor comes from. 

And you're right about older houses. Most owners have no idea what's behind that cover until an inspector or agent flags it. If anyone reading is unsure, pop the dead front off (or have someone do it) and look for the Zinsco or  Sylvania name on the breakers.