Never never never take the first offer they give you! If you're bullheaded they will yield, especially if you're their customer rather than a victim of their customer.
FWIW the first offer I got from the insurance company for my totaled '06 Daytona w/ 14.5k miles (totaled just one month ago) was $1k higher than what Progressive is offering you, and I worked them up another $1k by showing them classified ads. Different insurance company, but same concept. My bike only had a few more mods than yours does, and a lot more miles
'10 Tornado Red Street Triple w/ plenty of goodies