Meh ... the car is worth $4k, and he knows it. While he's not gouging you, he could go cheaper.
Drop the B16 out of there. Find an early, wrecked CRV (the SUV thing), and gank it's motor. It's a B-series as well, and will fit. Put the head from the B16 onto it, and you've got a nice 205hp (ish) B20 bomber swap

PS: your post makes me miss my hatch an incredible amount. It was the same car, except the 1991. The previous owner had installed a center console, and flat-blacked the whole thing, down to the GSR wheels. It had a D15B (95hp) with no VTEC because of the computer. (VTEC on that motor brings it to 125hp). He had it on cheap eBay coilovers. It was a damn gokart ... no PS or AC either.