25% increase in value seems a bit high to me too for the matched mag, but it definitely helps. In general the S/42 is not uncommon and you are correct that Luger pricing swings pretty wildly. That is why education is a great precursor to spending.
I'm seeing a slightly above average gun, not at all uncommon, but with a matching mag. My estimate would have come in a bit lower, but these guys know their stuff. And you are insuring it in the case of disaster NOT pricing it for fast sale.
Whether it is too valuable for display is a personal thing, you have to measure the risk and rewards vs. the possible consequences. Chump change to one guy may be a fortune to another.
Anyway, a nice bit of family history!
dju
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