This is excellent advice. Learn to fix your prose yourself. You'll be far better off, since you'll need those skills if you want to publish and make money at it.

Read Staroamers Fate
http://is.gd/WdmgqC
& Syrons Fate
http://is.gd/L2Vzrg

If you like, PM me for two editors who do freelance and who I am happy to recommend.
SPEED
Don't mistake my silence for weakness. Nobody plans murders out loud.

You're probably right, $500 isn't worth all the hassle. Man, I just can't believe all the careless errors he made. Plus, there were many genuine typos I committed that he completely overlooked. I'm going to have to have this manuscript re-edited because I don't trust my own proofreading skills.

All very good points. I've been in a face to face critique group for years. They serve the function of content editors, collectively. My beta readers are people I've known online for many years.
SPEED
Don't mistake my silence for weakness. Nobody plans murders out loud.

You shouldn't need to pay an editor. If the book is good enough, an editor might decide to take it on and make his money on royalty. On the other hand, no matter how good your book is, you still might not find anyone interested in it. Those are the realities of the market.
But paying an editor is just like self-publishing. You're almost certainly going to get ripped off. (Yeah, alright, I know there are the rare self-publishing successes, but they're few and far between.)
Why do you need an editor to "improve the general integrity of the prose"? If you need help learning how to write, you'd be better off spending your money on some creative writing course, which shouldn't be all that expensive if you take it at your local community college. At least you'll have three genuine academic credits out of it for whatever they're worth, but their worth will still be greater than your complete loss on a shyster who charges you upfront cash rather than accepting you on royalty.
And check meetup.com for "writers' groups." I don't know how good any of these are mileage will of course vary and be careful you don't let yourself get suckered into paying money (other than reasonable costs associated with renting a restaurant room, that sort of thing). Be careful also that group members respect each other's copyrights.
I'm a lawyer, and I'll tell you this. Don't waste your time suing someone for $500. Even assuming you win, you'll still have to collect your money out of someone who may well not have any assets worth executing on, and courts (even if you do this without a lawyer) have filing fees. You can get your filing fees assessed against this editor if you win, but still, like your $500, you'll have to find something worth executing against.

http://librarything.com/profile/CurrerBell

Alas, this is far more common than it ought to be. It's hard to check the credentials of people claiming to be editors, and any idiot can hang out a shingle and claim the title.
I know a person here on IMDb who is not a native English speaker. He paid a so-called editor over $10,000 (!) to edit his novel. The results were appalling. I took a look at the original and the corrected versions of his first chapter, and she introduced errors that were not there and completely overlooked other mistakes, big ones.
He asked for a refund. He did not get it.
I urge you to join AbsoluteWrite.com so you can ask people (including professional editors) who know their stuff what your next step should be.
SPEED
Don't mistake my silence for weakness. Nobody plans murders out loud.