My 2 cents: I don't think it is discounted enough.
+1
On one hand, if I were selling the bike I'd try and get about this much. But as a buyer, I'd look for something around $450 for a bike in this range of niceness in good condition (ideally, but would probably end up paying a little more for convenience). It's either up to you to negotiate it down or find a seller who undervalues their bike.
Don't discount the old steel bikes too much. They run the range from absolute dumps to well-maintained racing machines. One of my friends picked a nicer one up for $250 or so and it rides like a dream. You can probably find one for $250-300 if you keep looking.