I think 500/hour is reasonable for what a good SEO can do, but I would take 200/hour at a company with benefits, health insurance etc. Why don’t many companies employee full-time SEOs? I haven’t really seen an acceptable answer to this question here yet!
Why does it seem like all SEO work is short-term, contracted work and something that NOBODY is willing to pay the bucks for? I mean, go to Sitepoint and advertise your service for 200/hour–you’ll get flamed like you wouldn’t believe!