The price (which by be the preproduction price, not the volume price) includes the rifle portion, the grenade launcher, and the integrated night vision/laser rangefinder and shooter goggle system. Yes, it's expensive but it offers a lot more capability than an M-16/M-203 combo. For example, the XM-29 has a 6 round magazine for the 20mm grenade launcher compared to the single shot (and somewhat cumbersome to reload) M-203.

Actually, reading further into this article, it appears my info is dated. They've increased the grenade from 20mm to 25mm. This lead them to split the XM-29 concept into two different weapons - the XM-8 assault weapon and the XM-25 airburst assault weapon. The XM-8 is designed to be lighter, more versatile, and more reliable than the M-16. For example, the Compact version would be very good for urban engagements and the 100 round drum magazine is a nice touch. The XM-25 appears to be pretty early in the development stage so it's hard to say how it'll turn out. The ability to fire 6 times before reloading is very good, the effective range is 3 times that of the M-203 round, the airburst capability is very useful, and the rangefinder would be much better than the "guess the distance and look through the iron sights" method required of the M-203.