To be honest, I kind of pulled the $500 figure out of thin air. After getting some real info from Talka, it turns out it will be quite a bit higher.
For example, printing off 100 CDs in a slim case with just a slip for the cover will be 110,000 yen, or $1,315 at the current USD rate. Of course, the more you print, the better value (1000 CDs is 150,000 yen, or $1,793). For even a regular case and 4-page booklet we need to pay another 33,000 yen. So yeah, it's not going to be cheap, but economies of scale are at work here. The more money we can put up front, the more CDs we can print for a better value, and the lower we charge for it, the more likely people are to buy it.
Of course, you could go the economy route but that wouldn't be terribly impressive/eye-catching.