Bad move? Maybe. For our pockets (if you're not reimbursed by the job), yes, for theirs, no unfortunately.
As long as the CEH has the backing of the DoD as a baseline cert they can definitely get away with the costs. This comment is not made to degrade the certification in any way but rather to the effect of as long as there is a demand, people will pay just about pay anything within reason.
I nabbed CEH v6 earlier this year but if I had to do it again with these prices, I think I would still eventually force myself to do it. At the end of the day, money needs to be made and going back to the 8570, the ROI that comes from covering four out of five CND discipline baseline requirements isn't half bad at all!*
*This is assuming of course your DoD client doesn't require a CE and IAT or IAM cert on top of it.
From a private industry standpoint, I definitely agree with the others and I'd most likely spend my money on Offensive Security Training (OSCP/OSCE) and take exams such as the IACRB CPT/CEPT first. I am more of a hands-on guy personally so I have greater respect for technical certifications that force you to prove your skills in a labbing environment.