Your co-founder obviously doesn't value the company yet wants you to pay them full value.

The balance is that you could throw this right back at them and say, "I want out as well so I want you to pay me full value back."

Ideally you don't want their ownership dragging you down if you slave away for the next few years and make something of it. Therefore you should buy out their "half".

If they are making foolish demands like this they are probably in financial hot water. Take advantage of this and find out when they absolutely must have a certain amount of money (a credit card payment, a mortgage payment, etc.) and then on the day before it is due make them an offer for that amount (assuming it isn't 10k).

If they are going to be a dick, they just gave you a license to be a dick.