Insurance companies will still cover a salvaged vehicle, but they will only cover it for the value of a salvaged vehicle (which is what someone would be paying for it).
I'm not sure what the big deal is with a salvaged title. With a car, where the parts-cost to value ratio is relatively low, a salvaged title usually means a bent frame or worse. On a motorcycle, where to replace the tank alone can be as much as 1/3rd the value of the bike at retail prices (which it is in my case), it doesn't mean a whole lot.
There was absolutely no significant damage to the bike, just a large amount of superficial scratching. When the dealership estimated the repairs they had listed every part that was not perfect and then every nut and bolt that attached those parts. So, to be honest, I probably could have worked with the insurance company to not have had the bike totaled but it worked out better for me financially this way.
I dropped the asking price to $2000 a few days ago and I've gotten about 3 people lined up to come check it out this week. If it doesn't sell for $2K then I'll ride the wheels off of it myself, it's worth more than that to me.
Thanks for the input guys,