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So....I take it it was a bad thing to engrave this?
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Very. Antique gun collectors expect a gun to look its' age; originality is much more important than flash in gun collecting. Refinish any gun, and you cut the collector-resale value by a minimum of 50%.
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What's so special about this Colt and why is it $3,000?
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It -was- an original Colt Peacemaker of late 19th/early 20th-century production. These guns have been around forever and many were used with corrosive ammo and in corrosive environments, especially in the blackpowder days, so there aren't a lot left in circulation that work. For the gun's exposed metal surfaces to be flat/even enough and consistant enough for that kind of highly detailed engraving, it would have had to have been in pretty damned nice condition to begin with, which explains the $3,000 price tag. You don't repaint Ming vases, and you don't refinish antique firearms.