A transmission change can be a pretty big job. First, how are your mechanical skills? There are several things you'll need. Do you have a service manual (Factory, Haynes, etc.)? Do you have an suitable place to work on the bike? Finally, there are several special tools that are required. They can be made or improvised. But, these tools are somewhat expension.
If you can get the tools, manuals and the such, it's not too difficult a job. You just need to be very tedious of the documentation and procedures.
The ZX7 of 96 and up is a bit easier but the 91 to 95 is a bitch!! There are lots of small things you have to watch carefully when you do something like this.
Cleanliness is next to godliness in this case my friend.
I wouldnt recommend this job to anyone unless you are fully confident in your abilities and then you wouldnt be asking if its a big deal, you would know it is.
To save yourself some cash, Pull the engine and have the dealer take the complete tranny out and give it to you. Send your tranny to be welded and undercut and only replace what the transmission place wants to replace, like cracked gears and what not. Then put in a new shift drum, all 3 forks and the 2 shift shafts. Last but not least, put a shift kit into it. Factory brand tuning products makes a great one.
When they assmble it make sure they put it all in and walla! You got a super sweet tranny that will last much longer and shift much smoother. I send the shifting forks and drum out with the trannies to make sure they are deburred and set properly in it all. Its your call though.
I wouldnt question the 1200 dollars. My undercut ones that I do get upwards of 1500 or better depending on damage and parts involved. The labor is high because you are pulling an engine and splitting it open. Easily 10 to 20 hours work.
Yeah its a pain in the ass because basically you have to take the complete lower end of the engine apart. Best bet is to pull the engine and take it to a reputable shop and have them fix it. It's definately not a job for a beginner mechanic...