Bottom line, it's their fault for not having answered your original question about whether there was an upcharge for custom work and proceeding with the project without getting the OK on a quote from the customer. Had you okayed their quote and then not been able to pony up, the fault would've been yours, but as it seems there was no mention of extra cost from the artist and they went ahead with it, the fault is theirs.

If it were me, if I had the money to make the purchase and still wanted the item I'd go ahead and pay it and be much more wary of this sort of thing in the future; i'd chalk it up as a lesson learned and hope maybe it'd come back to me in the random exchange as a particularly nice gift. I'm kind of a doormat, though, and you are under no obligation whatsoever to be one yourself, haha. If I was in your situation and the new price was way out of my budget, though, I'd explain to them that because the original question was never answered and they went on with the project, I'd thought the item would cost the same as their other items (that there was no extra fee for the custom design work). I'd tell them I was prepared to pay the usual going price for the item (or whatever beyond that amount I could possibly come up with) and see what they had to say about it. Maybe they'll eat the cost of the custom design work and be more careful next time to quote up front for custom stuff or maybe they'll decide to sell the item to someone else, either way you're not the one in the wrong if you decide not to pay and choose another gift for the exchange.

It's a kinda crappy situation from both sides. However you decide to handle it, I hope things go well for you and the artist involved :(