First of all, I wouldn't pay anyone to produce a book of mine. You can self-publish easily on Amazon and can get hard copies, too. However, unless you are fantastic at social media then you will really struggle to get your book to readers' attention. There are millions of self-published books out there that don't sell any copies.
I'm a published author and I self-published a couple of books before I got an agent.
My agent had ten years' experience as an editor. Her advice was absolutely invaluable. She could see where characters needed more development, where I'd written pages which were unnecessary, where someone's motivation wasn't understood etc. It can feel brutal at first but once you get over that shock you quickly realise you've met someone who can help you make your book the best it can be. Not all agents can do this well - it's good to look at what they did before they were agents.
And then if it's bought you have an editor at a publishing house. Again, this person will have years and years of experience of working on many books. She will bring another pair of eyes (on top of the agent) and will help further develop the novel.
Then it's sent to the copy-editors who check it line by line, eg if your heroine goes to sleep on a Monday night and wakes up on a Thursday morning, she will warn you! She checks everything - if you say it was 20 degrees she will check whether that's reasonable. She keeps a check of all characters and makes sure you keep your story straight. She'll look for repetitions and check you realise the meaning of certain words. So at this point two other people have read your novel (agent and editor) yet still the copy-editor will find mistakes.
Then it goes to the proofreader who is purely checking for spelling and grammatical errors. You will think there are no mistakes before it reaches her, but you'd be surprised.
So when that person you talk about in your opening post is charging hundreds of pounds, what is that for, exactly? Make sure you know full details before you hand over any money. Bear in mind, too, that you would have to sell hundreds of books just to get your money back.
If I were in your position and was serious about being a published writer, I would submit to agents and take on board their responses. If I had no luck there and was willing to spend £500 then I'd spend it on a freelance editor and seriously take on board their advice. It can hurt, but once you stop smarting, you should realise that they are talking sense. They should have worked in publishing for a well-known publishing house.