Bummer!
Let's assume it is your PTO clutch. For $4K, I'd be taking it apart myself and figuring out what is wrong.
Here's a good PTO clutch assembly listed on ebay for $1K. I'd offer him less via email and see what he says. Based on part number (assuming your tractor was built in 2010 or after) it should be the correct one. You need to be sure of the year when your tractor was built. The earlier units (2007-2009) used a different clutch pack. Part number TD260-69002 was used starting in 2010 and after.
http://r.ebay.com/kgB2gC
For reference, the complete clutch assembly by itself, new from Kubota, will run about $1300. Depending on what shape yours is in, you might just need to replace internal parts which should be a lot cheaper.
Go to
www.kubota.com, click on Parts at the top of the page, then Illustrated Parts List, accept the terms, and put your model number in. Under Clutch/Transmission on the left expand the little plus sign. You will see PTO Clutch [Component Parts] listed. It will give you a nice exploded diagram that you can reference once you've pulled yours apart.
Take it apart, figure out where the metal came from,
clean everything really well and replace whatever is toast. Make sure to clean all of the bearings really well and check them to make sure they turn smoothly. If any are at all questionable, replace while you're in there.
Did I mention that you need to clean everything REALLY well???? Am I being clear???
Not being a smart a$$, just can't stress this strongly enough. Any metal left behind will just circulate and destroy stuff and you'll be repeating the job. You should be able to eat off the parts before it goes back together.
You will also need a shop manual. Buy the one from Kubota as the exploded views will prove very helpful. Yeah they're expensive, but they're worth every penny. Messick's is one good source for parts. No, I don't have any affiliation, just have found them good to deal with over time. For the WSM, look here -
http://www.messicks.com/Wiki/Kubota/L3540.aspx
You can search Kubota part numbers on this page to get an idea of prices:
http://www.messicks.com/KubotaTractorParts.aspx
This still won't be cheap. But, if you're willing to get your hands dirty, it will be a lot cheaper than what you were quoted. Absolute worst case, you take it apart, get stuck and bring it to the dealer apart for them to reassemble. You already know what it's going to cost.
Just go slow, take lots of pics, keep everything organized and you'll be fine. There is a lot of experience here on the board to help you if you get stuck.
Best,
Steve