2005 Prius dead; $worth reprogram key fob? Alternative options, suggestions please, asap!

I have a Gen2 2005 Prius that 'died' on me, and it is currently at the dealers shop awaiting my response to potential repairs. I was hoping I could get opinions on the situation with my car and the asking price from the dealership for the inspection + repairs.
Some detail; It is a car that has just hit 120,000 mi, it has been in a wreck from a car hitting it from behind a little over a yr and a half ago. It was fixed up and hasn't had any issues since; it passed state inspections & emissions exactly a month ago with flying colors. So I was quite shocked when I was driving it to an upper level of a parking garage, when it suddenly lurched and the red break light and the (!) ABS sign went on. I knew this was serious and drove it back to my home about 10 miles from where I was-as no auto shop was open at this time. Driving was fine, breaking was a problem. The car would do a series of lurches when I tried to slow down and stop at lights and stop signs. The break peddle felt sort of stiff, like something was stuck underneath it it.
The next day, I tried starting my car to see if I could drive it to the dealership, but the remote key fob now wouldn't open the door so I had to manually open it with the little key inside it. I pressed the on button and the car wouldn't work. I had it towed to the Toyota dealer. I was afraid the main battery within the car was dead.

The toyota dealer called me today, two days after it's been in the shop and said that it took that long for the inspectors to get the car to hold a charge enough to turn it on and 'figure out' what was going on. They said that it looked like the power to the battery was working but the key itself was no good. They said that I would need a whole new key to continue the inspection as the key itself might be what was causing all the issues with the car - the red break light, the (1) ABS sign, etc. They said that the key dying tends to happen after a prius reaches about 15 yrs old. Mine is only 12 yrs old. They said in order to reprogram a new key it would be $570-579 for that service!!! This includes the laser to cut the new key by VIN # and program to the car. They said even if I paid that and they got the key working, that they wouldn't be sure if the car had additional issues that were not related to the key itself. I'm not entirely sure if this price includes the $100 or so from the preliminary inspection or not.
I am not very knowledgable about this kind of stuff but to me $500+ seems very steep for such a service especially when through my research, I'm seeing that people get replacement remote key fobs for around $50-90, then pay a locksmith around $90 to program it. When the dealer said that the key itself might be making the breaks not work very well, I couldn't help but wonder how integral that key and the lazer computer system within it is to make the car work. Can someone explain to me exactly how that all works? I thought the internal car battery was most integral to the system of the car's workings, including breaks, not the key itself!
Most people who have had a similar issue with their key just pull out the little key inside and unlock the car manually then are able to drive the car just fine- Like I've mentioned before-I've been able to do this in the past as well when the fob wasn't working well, get the little key out, then was able to put the fob into the ignition to run the car go down to the store and buy a buy a CR2032 battery. I must say that in retrospect, for the last week or so before my car died, the key DID have to be in my hand instead of what I usually do-just in my bag to unlock it by hand. It's like it had to be very close to the car even remotely work (pun intended-I'm trying to stay optimistic about this situation, guys). Right now, I am not able to turn on my car after unlocking it manually or start it once it's in the ignition slot.
Especially considering the milage and wear this prius already has from the wreck it was in, I'm not sure what's worth it at this point- as far as how much more money to put into for repairs. Ideally, I've wanted this car to last another 3-5 years if I could, as I am a poor collage student and can't afford much at this time in my life. I inherited this car from my father who died from pancreatic cancer not too long ago, and it's one of the few things I have left from him. But I'm concerned, as I'm not sure if it's worth the cost if my car ends up dying again 6 months to a 1 year later, if not from the key, but potential battery issues. I've taken as many precautions as I can with protecting the battery- making sure the car doesn't overheat or freeze, etc. But I know the older models have been dying out more lately. In sum; Is what the Toyota dealership is asking for with this key reprograming for a 2005 Prius worth the price? - If the key is really that integral to how the car runs, and it really does need to be replaced and reprogrammed, is there an alternative to repairs that will make my car start working again?

Thank you for your time,

Halar47