You're right - in your scenario the seller would have to be smoking something or dumb.  

People want a place to look bright, not dark and dingy.

Checking smoke  and carbon monoxide detectors annually which is owner responsibility in this state?

When you start cutting into it, unexpected areas can go dark.

Currently rented to long term tenants of 4 and 8 years (both smoke and are pretty messy) paying 700 and 750/mn.

As you'll see below from the photos, the damage was pretty severe - including smoke and water damage as well.

you could actually paint a black line where one unit ends and the next begins, then choose colors that look good together...light gray, dark gray, tan, brick, green, colonial blue, like bm historical colors or some other palette.

Their expertise minimizes your risk of a bad situation, and your choice of project will be less of a shot in the dark. 

But just a random stab in the dark they want you to overpay IMO 500 extra for the headache of a STR isn’t worth it, plus you’d have to furnish it and pay for all the utilities.  

Very dark inside I will add natural lighting upstairs with sky tunnels.I will offer lower after 153 days on the market the price is still high and pay like 20% down to operate on breakeven basis.I do not anticipate homes of this vintage or neighborhood homes to appreciate much.