I think they went overboard compared to the low market value, but not terribly.
Fancy old Joss cues like this would be very hard to come by. They were made by Dan Janes, Bill Stroud, and Tim Scruggs, so you have the living legend thing going. A plain 4 pointer old logo Joss might go for $800 - $1000, so when you add in the fancy work on this cue, which makes it a rarity, double the value - you should get up to around $2K. If someone is willing to pay 2K, and the bidding gets heated, maybe they'll go another $500 or $600 for it to ensure they get it, because the next chance for a fancy old logo Joss might be in 2008...
While I am usually a value buyer, I've paid-up a number of times for rare pristine or fancy cues. Invaribly, these are the finest cues in my collection and are my most cherished prizes. Many bargains turn out to be disappointment, or mediocre examples, but the prize cues you fight for and pay up for are usually the ones really worth owning. Not knowing exactly what is motivating the buyer sometimes clouds the issue. For example, I paid up quite a bit to get a cue that was eluding me from the Palmer 1st Catalog - and I'm glad I did!
Chris