He prob only does canvas so that you can't scan it.
I guess you have look at it like art, would you pay $500 for a painting that you loved? I would and then some.
At the end of the day, you get a free canvas and he has spent the time $ and effort ( a lot longer than the hour session by the time he sorts through the pics) AND he has to pay for the canvas. He will end up quite a bit out of pocket.
I don't really see a problem with it, sounds like a good deal to me.