A full restoration, as Carl mentioned, means everything. Car completely disassembled, stripped of every nut, bolt whatever. Then blasted or dipped or otherwise cleaned and put back together with all new parts, or in the case of things that can't be found new, rebuilt or reconditioned parts. That should include the engine, transmission, rear-end, the whole thing. Then new bodywork and paint, interior, everything.
Now a 100% restoration and a 100% factory correct restoration are 2 different things as well, with the latter costing insanely more than the first, since the shop will have to source all date-coded parts. And most everything these days is over-restored, most people don't want to pay that kind of money to have factory fits and paint (they weren't that good!)!
35k for a full restoration isn't a bad price at all, although the "flat-rate" quote is a little interesting. Not having spoken to the shop I would assume this means that this is their minimum price they quote, so even if you brought them a perfect car and insisted they do a restoration thats what it would cost. Now if your brought them a door, I'm guessing it would cost a lot more, ie, when they fill out the work order they start adding from 35k.
A $50 shop rate is pretty conservative too. Maybe I'm a little off since I'm in CA, but when my dad was doing Austin-Healey restoration his last shop rate was over $75 an hour, and 35K would have been close to his starting price as well for a car in decent condition (mostly complete and no major rust).
If you're planning a full restoration you can pretty much figure that whatever you think the car will be worth when its restored will be the asking price for the restoration, being optomistic. There's no money to be made unless you intend to do all the work yourself, and then the "profit" is really just your labor cost. And if you over-restore or have a rough example, figure it will cost more than it will end up being worth, perhaps by A LOT if its really rough.
For example, my '72 challenger. I bought it for 11k, and figure that if I "fix it up" to how I would like it, it will cost me about 10k-15K in parts, doing my own work except the engine (engine rebuilt, floor panels patched, some new interior, new suspension, and self done bodywork and paint). If I'm lucky, when completed my car would go for around 20-25K (a loss!). If I had the money, I would have just bought a 25K car that I didn't have to do anything to, but I didn't have that kind of lump sum and I like doing my own work. And, when I'm finished it still won't be "restored", it'll just be fixed. Based on ebay and other auction sites, I would say that a fully restored (not 100% correct) run-of-the-mill '72 chally would be worth around $35K, up to maybe $45k at the top end. So $35K for the restoration is about right...