We went through this a few months ago with our lab-boarder collie mix...mutt if you prefer. I also started a discussion here, and ask the same question. It's definitely a tough one. Our dog is great. Good with kids, friendly with guests, never has bared teeth, etc, etc.
We were quoted a very similar price and mulled it over. It was a complete tear, according to the vet. Our dog wouldn't put weight on it, and didn't for almost a month. We opted to not have surgery. It has been quite some time now, and while he is less active than he was before (almost hyper-active at times before), he seems to be doing just fine. He now, not only puts weight on his leg but runs around again. There is no noticeable limp and he does not appear to be in any pain.
Now, our dog is 8 years old, which definitely played a role in our decision to not have surgery. If he had been younger, maybe 2-3, we probably would have, but with his age and life expectancy, coupled with some research on the canine's incredible ability to heal, we didn't jump to a decision.
Again, tough call. Can't fault someone for going either way, assuming we aren't talking about complete negligence.