is most certainly not standard practice.
I assume £700 is a payment for a set amount of lessons in a set amount of time and then both tests. Don't bother. Either you've misunderstood or they're seriously screwing people and need their trading practices investigating. If people don't know any better they'll do it. I saw someone get charged £70 for a tax disc whilst buying a 125cc bike before. All he knew was his car was over £100 and this was cheaper.
If you want to get it done first time and you're riding a lot then do it lesson by lesson and practice what you're taught in between lessons. It will be a pain in the arse but get it right and you'll pass.
Get the theory test sorted.
If you fail, you generally have another lesson or two and then retake the test, depending on how / how badly you failed. You have to wait a week or 10 days or so before resitting. So yes, whilst it's an expensive do, it's not so bad.
And all credit due to you for doing that kind of mileage on a 125cc. Not many people would be that crazy / have those kind of balls.
EDIT: training schools will charge more for tests booked through them. What they do is book test slots so they can offer them to their students so if you're peaking you can get a test booked the next day. That's standard practice. If you do fail and they say that it'll be silly money then just say you'll book it yourself (give an excuse of uncertain schedule if necessary) and you can sort it very easily over the internet.
Most places will charge lesson by lesson as well as any packages. The difference with a package is you pay a lot of money up front (even if not the full amount, still a lot) and you're stuck even if you don't like the instructor / they're crap.