I guess you can get an authorized battery replacement from Apple retail for $79? But does Apple really switch the entire phone out? I thought they replace batteries in store in less than 20 minutes and give you back your phone? Correct me if I am wrong? I thought Apple also can repair the back of the iPhone 4/4S without giving you a completely new phone and charge you less than the full $149/$199 replacement fee?
It depends on the model of iPhone. The Apple Geniuses in the Apple Retail Stores can replace the battery and/or the back glass panel on the iPhone 4/4S. However, for an iPhone 3GS (which is what the OP has) they take your old iPhone and give you a refurbished unit. They then send your old phone off to be refurbished.
I have no idea what repairs (if any) are possible on an iPhone 5 while in the Apple Retail Store.
from my understanding, if you qualify for the "battery replacement"... you ship your phone out and instead of disassembling the phone to replace the bad battery, they'll just ship you a replacement.
i did this "battery replacement" for my original iphone but they told me it's $149 and they don't have any more 2G iphone replacements so they'll probably gonna send me a 3G or 3GS.
The last time I checked Apple's Web site regarding out-of-warranty battery replacement, it said it was $79 to replace the battery on an iPhone 3GS.
Apple does have a process where you can ship your iPhone to them for warranty or out of warranty repaid work. However, if you have access to an Apple Retail Store, it is easier just to take you device in to them.
If Apple doesn't have your model in stock, they can order it.
As for charging you $149 versus $79, I would go look around Apple's Web site and find their pricing. It is difficult to find. You have to look around for it. Once you find it however, I would call Apple again and reference them to their own Web site. I think you are being overcharged.