I'm more familiar with the KJ CRD but then heaters are not that much different than they were back in the 1950's; hot coolant runs from the engine to a heater core (small radiator) inside the cabin and air moving over that core provides heat depending on how various controls are manipulated. I suspect what they are saying is there is a leak where either the inflow or outflow coolant line attaches to the heater core and it's likely that the heater core is at least partially aluminum. I suspect, simply because most are, you will find the heater core inflow/outflow lines on the firewall toward the passenger side of the engine and that the lines are partially metal and partially standard rubber heater hose secured with the silly factory spring clamps that tend to loose spring and fail over time or with removal/reinstall.
Whether the cost is reasonable depends on information you did not post and may not have. If the leak is at the point of the hose clamp the price is totally out of line as the fix is a 15-30 minute job (depending on access) plus ca. $10 for a bit of heater hose and maybe 2 new clamps. If the leak is because the heater core itself is cracked (maybe at or on the inflow/outflow pipes) then the price is totally reasonable as it would require a new heater core (ca. $270 on line price); pulling the dash or enough of the dash to get at the guts of the HEVAC unit to remove/install the new heater core; and some coolant replacement.
What to do:
1. find out which it is.
2. if it's a bad heater core I'd pay the $350 and count myself lucky that's all they want. Oh for the days where you could access the HEVAC unit by popping maybe 6-8 metal clips on its cover under the dash.
3. if it's just the hose then assuming no access issues that's an easy DIY job. You can usually worry the spring clamps off with pliers and then remove the bit of hose. Take care when removing the hose not to stress the heater core pipes too much lest they break. It's not uncommon for the hose to sort of glue itself to the pipes in which case removal can be challenging - a) don't try to pull the hose (it will just grab tighter) use something like a flat screwdriver blade to push the hose off; b) if that doesn't work try sliding a small blade between the inside of the hose and the pipe to break the seal or lightly grab the hose part that's on the pipe with pliers and twist the hose on the pipe but be careful not to apply too much force; c) get a sharp skill knife and gently cut the hose loose (I tend to prefer this method but sometimes I've found it best to cut the hose crosswise, then gently cut the hose lengthwise along the pipe, and then peel the hose apart and off the pipe). Reinstall will be obvious but use good stainless steel worm clamps instead of the OEM spring clamps and on the aluminum pipes tighten them snug not godzilla, run a day or 2 and recheck tightness.
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and enjoy the jeep in season! 
