I think the itinerary and routing is a big improvement, whirlwind Dieng but a decent plan and particularly if you are going to add 2 more nights and extra day free time in Yogya. The residual price of $432 (excl hotels and food which you do yourself) seems OK, if they will do it that way....which they might not. The 10% is probably the Goods and Services Tax (like a sales tax) and I believe is required, though whether a specific company quotes it as "included," or does it as an add-on, varies. Just as long as you know what the final bottom line price is. When I did my Indo hotel bookings, usually the quoted price was explicitly inclusive of all fees and taxes which seemed to be the most common way to do it in the price ranges I was looking at. Again, just be clear on how things are being quoted and get the bottom line. If their price including hotels is very similar to the total you'd pay for tour + hotels on your own, just let them do it but be firm if you have specific hotel requirements. 2 extra nights in Yogya you can do through tour company if competitive with a discounted retail price....or do yourself.

Additional thoughts:
--Sunrise tour at Borobudur is magical, I'd spend the money and do it. I've never regretted for a second spending the extra cash and lost sleep to get up at 4 a.m. and do this. Going at 6:00-6:30 a.m. after the sun has risen doesn't have the same impact. But it's up to you.
--Unclear if the part between Borobudur and Solo (esp Dieng) will have a guide going along with you in addition to the driver. Seems it would be adviseable unless the English-speaking driver is reasonably knowledgeable about the area. Or you could just advance research like crazy and take notes along to self-guide and augment driver's comments. Maybe even prioritize what you think you want to see on the Dieng and let the tour company comment on.
--Assuming driver will have to spend an overnight on the road when you do the Borobudur to Solo portion, make sure it's clear between you and tour company, whether the price includes provision for his overnight room and food. Most hotels will have areas or nearby quarters where drivers/staff stay when accompanying paying guests.

I think you'll be happier with this new plan since you seemed a bit lukewarm and not committed to the original idea of Malang-Bromo. Certainly, it will be much easier on the body than all those long car trips of the original 7 days. The car time on this one is more broken up with interesting stuff and distances aren't so long.